The Federal Reserve\'s organization There are (5/7/12) Federal Reserve regional

Question

The Federal Reserve's organization

There are (5/7/12) Federal Reserve regional banks.

Which of the following is a responsibility of the Federal Open Market Committee (FOMC)?

A. Buying and selling stocks

B. Issuing mortgages to homeowners

C. Making decisions regarding monetary policy

The Federal Reserve's primary tool for changing the money supply is (the discount rate/open market operations/ the resreve requirement). In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will (buy/sell) government bonds.

Explanation / Answer

1. FOMC is more concerned with making decisions about the monetary policy.

2. Open market operations is the primary tool with the fed to control the money supply .

3. To increase the money supply the Fed will buy the government bond. This will increase the balance if banks with the fed. Hence, an increased money supply.

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