Which of the Following Tools of the Fed Likely Acts

question 126

Multiple Choice

Which of the following tools of the Fed likely acts most quickly and predictably on the money supply?

• A) discount rate
• B) reserve requirement
• C) open-market operations
• D) selective credit controls

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Definitions:

Money Demand Curve

A graphical representation showing the relationship between the quantity of money people want to hold and the interest rate.

Fed

The central banking system in the United States, known as the Federal Reserve System, is tasked with overseeing monetary policy.

Government Bonds

Securities issued by a government to raise funds from the public, promising to pay back with interest at a future date.

Excess Supply

A situation where the quantity of a good or service that is available surpasses the quantity demanded at a current price, often leading to a price decrease.