Chapter 27, Problem 1MCQ

To determine

The function of the federal reserve system among the options given in the question.

Explanation of Solution

The way a central bank, usually referred to as the "bank's bank" or the "bank of last resort," affects the demand, supply, price, and quantity of money and credit to guide a country's economic goals and is defined as monetary policy. The nation's central bank, Federal Reserve, was given the power to create American monetary policy as a result of the Federal Reserve Act of 1913. The Federal Reserve accomplishes this using three instruments: reserve requirements, discount rates, and open market activities. The Board of Governors of the Federal Reserve (commonly known as The Fed) oversees the discount rate as well as reserve requirements, while the Federal Open Market Committee (FOMC) is in charge of carrying out open market operations. Thus, from the above explanation, we can conclude that the correct option is A, Monetary policy.