Question

Which of the following was not an old tool of monetary policy discussed in this class?

O Purchasing Treasury securities through open market operations
O Setting the interest rate on reverse repurchasing agreements
O Setting the interest rate on discount loans
O Setting the required reserve ratio

Answer 1

The old tool of monetary policy not discussed in class is setting the interest rate on reverse repurchasing agreements, which is a newer central bank tool compared to open market operations, the required reserve ratio, and discount loans.

Step-by-step explanation:

The old tools of monetary policy that were discussed in class, which are traditionally used by a central bank, include: open market operations, setting the required reserve ratio, and setting the interest rate on discount loans. Open market operations involve buying and selling government bonds, the required reserve ratio determines the minimum reserves a bank must hold, and the discount rate is the interest rate charged by the central bank on loans to commercial banks. The tool not discussed as an old tool of monetary policy is setting the interest rate on reverse repurchasing agreements. Reverse repurchase agreements are a newer monetary policy tool used by central banks to manage liquidity and control the money supply.