Why Does the Fed Have Imperfect Control Over the Money

question 80

Multiple Choice

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

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

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Definitions:

Catabolic

Related to catabolism, the process of breaking down complex molecules into simpler ones, releasing energy in the body.

Citric Acid Cycle

A series of chemical reactions used by all aerobic organisms to release stored energy through the oxidation of acetyl-CoA derived from carbohydrates, fats, and proteins.

Oxaloacetic

Relating to oxaloacetic acid, a four-carbon molecule critical in the citric acid cycle for energy production within cells.

Acetyl-CoA

is an important molecule that plays a central role in metabolism, acting as a substrate for the citric acid cycle and fatty acid synthesis.