The Fed Tends Not to Use Discount Policy as Its

question 34

Multiple Choice

The Fed tends not to use discount policy as its principal tool in influencing the money supply since

• A)discount loans do not affect the money supply.
• B)it does not have as much control over discount loans as it has on open market operations.
• C)it is prohibited from doing so by an act of Congress.
• D)it prefers to use reserve requirements.

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Definitions:

Central Banks

Institutions that manage a country's currency, money supply, and interest rates.

Federal Reserve System

The central banking system of the United States, responsible for monetary policy, regulation of financial institutions, and ensuring financial stability.

UCC

Governing all commercial activities in the United States, the Uniform Commercial Code is a complete assembly of legal rules.

Savings and Loans

Financial institutions traditionally focused on accepting savings deposits and making mortgages and other loans.