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Which tool of monetary policy does the Federal Reserve use most often? open-market operations term auctions...



Which tool of monetary policy does the Federal Reserve use most often?
open-market operations
term auctions
changes in reserve requirements
changes in the discount rate
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A) Open market operations

It is used frequently because of its flexible nature and because of that it is conducted several times weekly to keep the federal funds rate at the target level.If federal Reserve wants to increase money supply in the economy,it purchases securities and other assets and injects money in return in the economy and if it wants to reduce money supply,it sells out the securities.

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