Which of the following is NOT an example of monetary policy?

a. The Federal Reserve reduces the reserve requirements.
b. The Federal Open Market Committee decides to sell bonds.
c. The Federal Reserve facilitates bank transactions by clearing checks.
d. The Federal Open Market Committee decides to buy bonds.

Solutions

Expert Solution

Option C is not an example of monetary policy.

Monetary policy is the discretionary policy by the central bank of a nation that influences the economy's money supply and interest rate. The major tools include reserve requirements and open market sales, and the purchase of government bonds. When the Federal Reserve facilitates transactions by clearing cheques, it will not influence the money supply and cannot be considered a monetary policy tool.

Dr. OWL answered 3 years ago

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