The tool most often used by the Fed to control the money supply is
A)changing reserve requirements.
B)open market operations.
C)buying and selling of equities.
D)altering the discount rate.

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities, which directly affects the amount of money in circulation. By purchasing securities, the Fed increases the money supply, and by selling them, the Fed decreases the money supply, making it the most commonly used tool to control the money supply. Reserve requirements and altering the discount rate can also affect the money supply but are not as frequently used by the Fed. Buying and selling of equities is not a tool used by the Fed to control the money supply.

The Tool Most Often Used by the Fed to Control