what is the most frequently employed instrument of monetary policy?
A. the discount rate
B. reserve requirement
C. open market operations
D. moral suasion
please help and explain the answer.
- Socrates2Lv 58 years ago
A and B are both good.
An "instrument" is a _man-made tool_.
The "open market" is considered hazardous and contingent; in theory and _popular_ "free market" myth it exists _beyond_ public or private interventionist control . So scratch out "C." Your conventional economics professors would ding you for this cynical answer.
Moral suasion? Appeals to "morality" have no place in the existential, highly amoral post-Marxist, "finance capitalism" economy. That eliminates "D."
Bankers _love_ the ridiculously low "reserve requirement," as low reserve results in minimal-risk, obscene banking profits.
So that leaves the cheap-money-to-banks "discount rate." "A," the obvious answer.
You really should read that economics book. In a representive democracy, it'll do you a world of good, make you an informed citizen and prepare you to vote for informed politicians, as opposed to the pro-corporate sponsored hacks...
I suspect the discount rate "carrot" tends to be the one most often used.Source(s): The Age of Uncertainty by J. K. Galbraith; The Money Masters, a documentary; (free on the www) Tragedy and Hope by Carroll Quigley (free on the www)
- Anonymous8 years ago
The correct answer is C. Change the fund rate through market operation.