The most frequently used tool of monetary policy is:
A)open-market operations. changes
B)in the discount rate.
C)changes in reserve requirements.
D)changes in the money multiplier.

Question

Quizplus · Accepted Answer

Open-market operations refer to the buying and selling of government securities by the central bank in order to influence the money supply and interest rates in the economy. This is the most frequently used tool of monetary policy as it allows the central bank to quickly and easily adjust the money supply to achieve its macroeconomic objectives. Changes in the discount rate (B) and reserve requirements (C) are also commonly used, but are less frequently employed compared to open-market operations. Changes in the money multiplier (D) are not a direct tool of monetary policy, but rather a result of changes in the money supply caused by the implementation of policy tools such as open-market operations.

The Most Frequently Used Tool of Monetary Policy Is