The Fed's control of the money supply is not precise because
A)Congress can also make changes to the money supply.
B)there are not always government bonds available for purchase when the Fed wants to perform open-market operations.
C)the Fed does not know where all U.S.currency is located.
D)the amount of money in the economy depends in part on the behavior of depositors and bankers.

Question

Quizplus · Accepted Answer

The behavior of depositors and bankers can affect the amount of money in circulation through their decisions to deposit or withdraw funds, lend or borrow money, and create or repay loans. Therefore, the Fed's control of the money supply is subject to some degree of uncertainty and imprecision. While Congress can also influence the money supply through fiscal policy, this does not negate the fact that the money supply is also subject to other factors beyond the Fed's direct control, making option A only partially correct. Option B may be a temporary constraint on the Fed's open-market operations, but the Fed has other tools at its disposal to adjust the money supply. Option C is also not a major factor since the Fed has the ability to track the circulation of currency within the banking system.

The Fed's Control of the Money Supply Is Not Precise