The Fed's primary tool to change the money supply is
A)changing the interest rate on reserves.
B)changing the reserve requirement.
C)conducting open market operations.
D)redeeming Federal Reserve notes.

Question

Quizplus · Accepted Answer

The Fed's primary tool to change the money supply is by conducting open market operations, which involve buying or selling government securities to inject or remove money from the banking system. This can influence the federal funds rate, which in turn affects other interest rates in the economy and ultimately impacts the overall level of economic activity. While changing the interest rate on reserves and reserve requirement can also affect the money supply to some extent, these tools are not as commonly used or powerful as open market operations. Redeeming Federal Reserve notes is not a tool that the Fed uses to change the money supply.

The Fed's Primary Tool to Change the Money Supply Is