Final answer:
The Federal Reserve is responsible for regulating the money supply in the economy as part of its duty to conduct monetary policy. It uses tools like open market operations, the discount rate, and reserve requirements to achieve this. Managing the money supply helps in stabilizing the economy and reaching macroeconomic goals such as low unemployment and inflation. The correct option is a) Is
Step-by-step explanation:
Regulating the money supply in the economy is a duty of the Federal Reserve. This regulatory action is part of what is known as monetary policy, which includes the management of interest rates and credit conditions to influence the level of economic activity. The United States employs a fractional reserve banking system, mandating that banks keep a certain fraction of deposits as reserves, thereby controlling the amount of money that can be loaned out.
The Federal Reserve utilizes three traditional tools to implement monetary policy: open market operations, the discount rate, and the reserve requirements. These tools are used to achieve macroeconomic objectives such as low unemployment and controlled inflation. Additionally, the Federal Reserve ensures the stability and integrity of the financial system, as seen during its critical role in the 2008-2009 financial crisis.
The correct option is a) Is