question archive The Fed can implement open market operations: a
The Fed can implement open market operations: a
Subject:EconomicsPrice:2.88 Bought3
The Fed can implement open market operations:
a. more rapidly than changes in reserve requirements, but less rapidly than changes in the discount rate.
b. more rapidly than changes in the discount rate, but less rapidly than changes in reserve requirements.
c. less rapidly than either changes in the discount rate or changes in reserve requirements.
d. more rapidly than either changes in the discount rate or changes in reserve requirements.
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The answer is a.
- The reserve requirement would be less rapidly changing compared to the discount rate and open market operations.
- Open market operations (OMO) would be changing less rapidly compared to the discount rate. The discount rate will be charged to banks who borrow funds from the FED to secure the reserve requirement while the OMO would have an impact on the changes in the market interest rate. If the market interest rate changes more frequencies, the economic stability will be destroyed.
