Question

1. Which of the following is not a fundamental function of the Federal Reserve?

   	1.	Conduct the nation's monetary policy.
   	2.	Provide an effective payments system.
   	3.	Regulate banking operations.
   	4.	Ensure bank profitability.
   	5.	All of the above are fundamental functions of the Federal Reserve.

QUESTION 2

1. Which of the following is not one of the Fed's monetary policy tools?

   	1.	Open market operations
   	2.	Changes in the fed funds rate
   	3.	Changes in the discount rate
   	4.	Changes in the required reserve ratio
   	5.	All of the above are monetary policy tools of the Fed

Answer 1

Q-1) The correct answer is

Ensure banks profitability

The federal reserve wants to maintain a healthy banking system where people do have trust on the banks but ensuring profitability for banks is not the federal reserve priority.

Other options are correct. It conducts nations monetary policy; it does regulate the payment mechanism and it regulates banking operation.

Q-2) the correct answer is

All of the above are monetary policy tools of the Fed

The federal reserve has broadly four monetary policy tools

Open market operation, reserve requirement, discount rate and the interest rate charged on reserve, (federal funds rate). Federal funds rate is the rate which commercial bank charge each other to lend money to meet reserve requirement, that is set by the federal open market committee.