The most frequently used instrument by the FED to increase and decrease the Mone

Question

The most frequently used instrument by the FED to increase and decrease the Money Supply is: (A) Discount Rate (B) Federal Funds Rate (C) Open Market Committee Operations (D) Depreciation of the currency (E) Demonetization of the currency (F) Manipulation of the exchange rate The most frequently used instrument by the FED to increase and decrease the Money Supply is: (A) Discount Rate (B) Federal Funds Rate (C) Open Market Committee Operations (D) Depreciation of the currency (E) Demonetization of the currency (F) Manipulation of the exchange rate The most frequently used instrument by the FED to increase and decrease the Money Supply is: (A) Discount Rate (B) Federal Funds Rate (C) Open Market Committee Operations (D) Depreciation of the currency (E) Demonetization of the currency (F) Manipulation of the exchange rate

Explanation / Answer

Ans) c is the correct option. Open market committee operations. It includes buying and selling of bonds, if the government wants to increase the money supply the fed will purchase bonds which leads to inflow of money in the economy and if the government wants to decrease the money supply it sell the bonds which leads to outflow of money from the economy.

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