Which Statement Best Reflects the Fed's Approach to Expansionary Monetary

question 331

Multiple Choice

Which statement best reflects the Fed's approach to expansionary monetary policy before the mortgage debt crisis?

• A)The Fed would announce a lower target for the federal funds rate, then increase the supply of reserves through a balanced combination of the monetary policy tools.
• B)The Fed would quietly begin using open-market operations to increase the supply of reserves, with secrecy critical to not alarming securities markets.
• C)The Fed would announce a lower target for the federal funds rate, then rely primarily on open-market operations to increase the supply of reserves.
• D)The Fed would itself lower the federal funds rate and then use a varied combination of monetary policy tools to increase the supply of reserves.

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