Which of the following is correct?
A)The Fed has very good control over the money supply and bank reserves.
B)The Fed has very poor control over the money supply and bank reserves.
C)The Fed has very good control over bank reserves but not over the money supply.
D)The Fed has very good control over the money supply but not over bank reserves.

Question

Quizplus · Accepted Answer

The Federal Reserve (the Fed) has direct control over bank reserves through its open market operations, discount rate, and reserve requirements. However, its control over the money supply is less direct because it depends on the behavior of banks in lending and the preferences of the public in holding cash versus deposits.

Which of the Following Is Correct