A Problem That the Fed Faces When It Attempts to Control

question 1

Multiple Choice

A problem that the Fed faces when it attempts to control the money supply is that

• A)since the U.S.has a fractional-reserve banking system,the amount of money in the economy depends in part on the behavior of depositors and bankers.
• B)the Fed has to get the approval of the U.S.Treasury Department whenever it uses any of its monetary policy tools.
• C)while the Fed has the ability to change the money supply by a large amount,it does not have the ability to change it by a small amount.
• D)federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks.

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