Which of the following are tools that are employed by the Federal Reserve in its efforts to control the money supply?

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

A. I, II, III, IV

B. II, III, IV

C. I, III

D. I, II, III









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




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