Final answer:
Fed policy during both the Volcker Regime and the current era mainly used open market operations to influence monetary conditions. While the economic contexts differed, both eras included tactics that could affect borrowing costs for home buyers as a consequence of changes in the federal funds rate.
Step-by-step explanation:
Regarding Fed policy during both the Volcker Regime and in the current era of superabundant reserves, option E is the most relevant: Both use (or used) open market operations rather than administered rates. During the Volcker era, the Federal Reserve conducted open market operations to influence the federal funds rate, which in turn impacted reserve levels of banks and borrowing costs, including those for home buyers. It continued with operations intended to target money supply growth, specifically M1. In the current era, while the traditional tools of policy, such as changing reserve requirements and the discount rate, are still valid, open market operations have been vastly more significant, especially with the expansion of the Fed's balance sheet to put downward pressure on longer-term interest rates.
The goal in both periods has been to stimulate economic activity; however, the execution and surrounding economic conditions differed. Regardless of the approach, an increase in the federal funds rate generally leads to higher borrowing costs, impacting various credit products, including mortgages. Therefore, when the Fed tightens monetary policy, it can cause borrowing costs for home buyers to rise.