Knowledge of Capital MarketsDifficulty 2/5
The Federal Reserve conducts open market operations to influence the money supply. This is an example of what?
- ARegulatory policy, which the Federal Reserve carries out through rates and operations
- BTrade policy, which the Federal Reserve carries out through rates and operations
- CMonetary policy, which the Federal Reserve carries out through rates and operations
- DFiscal policy, which the Federal Reserve carries out through rates and operations
Show answer and rationale
Correct: C. Monetary policy is the Federal Reserve acting on the money supply and rates. Fiscal policy is taxation and government spending, which are decisions of Congress and the executive, not the Fed.
- D — Fiscal policy is taxation and government spending, and is not set by the Federal Reserve.
- A — Regulatory policy is not the term for influencing the money supply through market operations.
- B — Trade policy concerns tariffs and international commerce, not domestic money supply.