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

By Peter Cherewyk AAA
A:

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




RELATED FAQS

  1. What's the highest year-over-year inflation rate in the history of the U.S.?

    Learn about periods with the highest inflation in U.S. history and the mandated role of the U.S. Federal Reserve in controlling ...
  2. What are the main components of the Federal Reserve's balance sheet?

    Find out which items are listed as assets and liabilities on the balance sheet of the Federal Reserve, and how to read the ...
  3. How do leverage ratios help to regulate how much banks lend or invest?

    Learn what leverage ratios mean for banks, how regulators restrict leverage, and what impact ratios have on a bank's ability ...
  4. What's the lowest year-over-year inflation rate in the history of the U.S.?

    Learn about years with the lowest year-over-inflation in U.S. history. Read about how inflation is calculated using the consumer ...
RELATED TERMS
  1. Licensed For Reinsurance Only

    A license that allows a company to engage in services related ...
  2. Insurance Regulatory Information System (IRIS)

    A collection of databases and tools used to analyze the financial ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, ...
  4. File-And-Use Rating Laws

    Insurance regulations allowing an insurance company to use new ...
  5. Advance Dividend

    An estimate of the present value of an asset being liquidated ...
  6. Economic Justice

    Economic justice is a component of social justice. It's a set ...
Related Articles
  1. Economics

    The New Global Banking Regulations To ...

  2. With the second-largest economy in the world, China has significant (and growing) influence on the global economy. But how is that impact figured?
    Economics

    A Look At China's Growing Influence ...

  3. Quantitative easing in Europe is coming, but too slowly to avert a severe slowdown and perhaps even a hard landing.
    Economics

    How Is Europe Affecting The Martkets?

  4. If you're considering investing in China and want to know when to buy, sell, hold or stay away, consider these economic indicators.
    Economics

    Eyeing China? Consider These Economic ...

  5. Economics

    How A Limited Government Affects A Country's ...

Trading Center