Question

Which of the monetary tools available to the Federal Reserve is most often used? Why?

1) Open market operations
2) Discount rate
3) Reserve requirements
4) All of the above

Answer 1

The most commonly used monetary tool available to the Federal Reserve is open market operations.

Step-by-step explanation:

The most commonly used monetary tool available to the Federal Reserve is open market operations. Open market operations involve buying and selling government bonds with banks to influence the quantity of bank reserves and the level of interest rates. The Federal Reserve conducts open market operations to target the federal funds rate, which is the interest rate charged by banks when making overnight loans to other banks.