A problem that the Fed faces when it attempts to control the money supply is that the Fed can only control excess reserves but not total reserves. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount. the Fed does not control the amount of money that households choose to hold as deposits in banks.
A problem that the Fed faces when it attempts to control the money supply is that the Fed can only control excess reserves but not total reserves. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount. the Fed does not control the amount of money that households choose to hold as deposits in banks.
Chapter13: Monetary Policy
Section: Chapter Questions
Problem 7E
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A problem that the Fed faces when it attempts to control the money supply is that
the Fed can only control excess reserves but not total reserves.
the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.
the Fed does not control the amount of money that households choose to hold as deposits in banks.
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