Why Does the Fed Have Imperfect Control Over the Money

question 168

Multiple Choice

Why does the Fed have imperfect control over the money supply?

• A)Because the Fed does not know how much reserves will change when it buys or sells securities.
• B)Because of unpredictable changes in the public's desire to hold cash and banks' desires to hold reserves.
• C)Because of unpredictable changes in reserve requirements.
• D)Because of the secrecy of FOMC meetings, which lead to policy surprises.

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Definitions:

Accumulated Depreciation

Accumulated depreciation is the total amount of depreciation expense that has been recorded against a company's assets over time.

Expense Account

An account in financial accounting that represents costs incurred by a company during a period, not directly tied to the production of goods or services.

Equipment Account

An account where the cost of purchased equipment is recorded, reflecting the total value of equipment owned by a business.

Capitalized

Refers to recording an expenditure or cost as an asset on the balance sheet, rather than an expense, typically to spread out the cost over its useful life.