Question

Which of the following is NOT a responsibility of the Federal Reserve System?

A. The Fed only loans money to member banks.
B. The Fed issues all of the U.S. currency for the U.S. treasury.
C. The Fed sells, transfers, and redeems government bonds, bills, notes, and securities.
D.The Fed regulates the banking system by monitoring how much money each bank has in reserve.

Answer 1

The correct answer is A. The Fed issues coin and paper money to the US treasury (i.e. US currency). It also sells, transfers and redeems government bonds, bills, notes and securities as it is, effectively, the government's bank. The Fed also regulates how much money each bank has. However, they do not only loan money to member banks (member banks are simply banks which own stocks in the Fed).

Answer 2

I believe the answer is: A. The Fed only loans money to member banks.

During inflation for example, the federal reserve could issue government owned bonds that can be bought by normal citizens (non member banks)
This allow them to take in a lot of money from market circulation and gradually increase the value of the currency.