Which one of the following is not the tool for the Fed to enforce monetary policy?A)...

Which one of the following is not the tool for the Fed to enforce monetary policy?A) changing U.S. government securities holdings. B) changing capital requirements. C) changing discount rates.D) changing reserve requirements.

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Expert Solution

Option B.

Changing capital requirements is not the tool used by Fed to enforce monetary policy.
The three main tools used by Fed are :Open market operations which involves purchase and sale of government securities, changing discount rates and reserve requirements.
When Fed purchases securities and decreases discount rates and reserve requirements, money supply increases within the economy. ( Expansionary monetary policy)
Similarly when it sells those securities in open markets and increases reserve requirements and discount rates, money supply decreases within the economy. (contractionary monetary policy)

Rahul Sunny answered 1 year ago

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