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Which of the following tools does the Federal Reserve no longer use for monetary policy? Choose...

Which of the following tools does the Federal Reserve no longer use for monetary policy?

Choose one or more:

A. reserve requirements

B. federal funds rate

C. discount rate

D. open market operations

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Homework Answers

Answer #1

Option A, B.

  • Federal reserve uses three main tools of monetary policy which includes, open market operations, reserve requirements and discount rate.
  • Federal funds rate is the rate of interest set by the Fed at which each banking institution lend to other financial institutions. Hence it is not a monetary policy tool.
  • Reserve requirement was a rarely used monetary policy tool. As it has been declared as zero percent effective, it is no longer used as a monetary policy tool.
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