I. Moral suasion
II. Changing the discount rate
III. Changing the reserve requirement
IV. Changing the prime interest rate





The tools of the Federal Reserve include all the above except changing the prime interest rate. The prime interest rate is set by banks. To be sure, the practices and policies of the Fed affect the prime, but the Fed does not set that rate. The Fed also employs the operations of the FOMC, and Regulation "T" in its efforts. For more help see moral suasion, and our Series 7 Exam Prep.

Correct answer: d. I, II, III

  1. What happens to a 529A account when the beneficiary dies?

    According to the Achieving a Better Life Experience Act of 2014 (ABLE Act), when the designated beneficiary of a 529A account ... Read Full Answer >>
  2. Who decides to print money in Russia?

    The Central Bank of the Russian Federation (CBRF), like its peers in most countries, is the governmental entity responsible ... Read Full Answer >>
  3. Who decides to print money in Canada?

    In Canada, new money comes from two places: the Bank of Canada (BOC) and chartered banks such as the Toronto Dominion Bank ... Read Full Answer >>
  4. Who decides when to print money in India?

    The Reserve Bank of India, or RBI, manages currency in India. The bank's additional responsibilities include regulating the ... Read Full Answer >>
  5. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
  6. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
Related Articles
  1. Investing

    Is it Time to “Buy” Inflation?

    Based on recent data from the Treasury-Inflation Protected Securities (TIPS) market, it would seem that most investors aren’t worried about inflation.
  2. Economics

    Where Would the Dow Be Without Fed Intervention?

    What would the Dow look like without the accommodative monetary policies the Federal Reserve has implemented since the financial crisis?
  3. Economics

    How the Fed Fund Rate Hikes Affect the US Dollar

    Learn about the effects the federal funds rate on the U.S. dollar. Understand what happens when the Federal Reserve increases interest rates.
  4. Investing

    What a U.S. - Asia Trade Deal Means For Business

    The U.S. and 11 other countries, comprising 40% of the world’s total economic output, have finally reached agreement on the Trans-Pacific Partnership.
  5. Investing

    What a Fed Delay Means for the ECB & BoJ

    The Fed’s continued delay has repercussions for more than just the U.S. economy and markets. The ECB and the BoJ may support the case for stocks in Europe.
  6. Economics

    Understanding Income Inequality

    Income inequality refers to the uneven distribution of income across a single economy.
  7. Economics

    Who is a Hawk?

    In the economic sense of the word, a hawk is someone who believes high interest rates should be maintained to keep inflation low.
  8. Investing Basics

    Explaining Fixed Exchange Rates

    A government using a fixed exchange rate has linked the value of its currency to the value of another country’s currency, or the price of gold.
  9. Investing

    Latin America’s Economic Forecast

    After a ten-year run, the economies of Latin America are in a decline. For sustainable, long-term growth, the region needs structural reforms.
  10. Economics

    Why the Euro Failed to Become the World's Reserve Currency

    Examine the current state of the U.S. dollar as the world's reserve currency; learn the major reasons why the euro has failed to replace it in that capacity.
  1. Crowding Out Effect

    An economic theory stipulating that rises in public sector spending ...
  2. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  3. Deficit

    The amount by which a resource falls short of a mark, most often ...
  4. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  5. Purchasing Power

    The value of a currency expressed in terms of the amount of goods ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board ...

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!