Question

Although the policy of administered rates is a non-traditional monetary policy, it has some things in common with traditional monetary policy. What is true not only of administered rates but also of all traditional policies?

Group of answer choices

The Fed would sell bonds to banks when it pursues a restrictive approach.

The Fed would buy bonds from banks when it pursues an accommodative approach.

The Fed's ultimate goal is to preserve stability of the financial system.

The Fed's ultimate goal is to achieve its dual mandate.

The Fed's ultimate goal is to achieve income equality..

Answer 1

The Fed's ultimate goal, be it through administered rates or traditional monetary policy tools, is to preserve the stability of the financial system and fulfill its dual mandate of promoting maximum employment and price stability.

Step-by-step explanation:

Similar to traditional monetary policy tools such as open market operations, reserve requirements, and discount rates, the policy of administered rates is designed to influence economic activity. Regardless of the method used, the Federal Reserve's ultimate goal is to preserve stability of the financial system and achieve its dual mandate, which includes promoting maximum employment and stable prices. This goal does not necessarily include achieving income equality, as monetary policy primarily focuses on macroeconomic stability rather than individual income distribution.

• The Fed would sell bonds to banks when it pursues a restrictive approach to decrease the money supply and curb inflation.
• The Fed would buy bonds from banks when it pursues an accommodative approach to increase the money supply and stimulate economic growth.
• The dual mandate of the Federal Reserve seeks to balance the trade-offs between different economic goals, such as controlling inflation and maintaining full employment.