Final answer:
The Federal Reserve is responsible for determining the amount of currency in circulation at any given time, part of its broader role in conducting monetary policy and ensuring the stability of the financial system.
Step-by-step explanation:
The Federal Reserve, often referred to as "the Fed," is the central bank of the United States and has vital responsibilities in the nation's financial system. Among the Fed's duties is to conduct monetary policy, which includes adjusting interest rates and influencing macroeconomic policy with the aims of achieving low unemployment and low inflation. Additionally, the Federal Reserve is tasked with ensuring that the banking system is properly regulated to protect depositors and maintain the health of banks' balance sheets.
One of the specific functions of the Federal Reserve is to manage the amount of currency in circulation. This involves ensuring that there is sufficient currency and coinage to meet public demand, which can entail increasing the availability of currency during high-demand periods, such as the Christmas shopping season, and then reducing it afterward. Therefore, the correct answer to the student's question is option B, as the Federal Reserve is responsible for determining the amount of currency in circulation at any given time.
It is worth noting that while the Fed's policy decisions don't require congressional approval, the institution operates with a semi-decentralized structure, reducing political influence on economic policymaking.