MacroEconomics: Federal Open Market Committee?

The Federal Open Market Committee (FOMC):

A. Is responsible for lending money to banks and thrifts at the discount rate

B. Directs purchases and sales of government securities as part of Federal Reserve policy

C. Issues Federal Reserve Notes

D. Competes with the Fed in the market for central bank services

MacroEconomics: Federal Open Market Committee?loan rates

The option closest to the Truth is:

B. Directs purchases and sales of government securities as part of Federal Reserve policy

It also influences the role of Fed which

A. Is responsible for lending money to banks and thrifts at the discount rate

The FOMC sets monetary policy by specifying the short-term objective for open market operations--purchases and sales of U.S. government and federal agency securities. Open market operations, the principal tool of monetary policy, affect the provision of reserves to depository institutions and, in turn, the cost and availability of money and credit in the U.S. economy. Currently, the objective is a target level for the federal funds rate (the rate that depository institutions charge on overnight sales of immediately available funds among themselves).

NoteS;

Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the Board of Governors, which has seven members, and five reserve bank presidents. The president of the Federal Reserve Bank of New York serves continuously, while the presidents of the other reserve banks rotate in their service of one-year terms.

The FOMC meets eight times per year to set key interest rates, such as the discount rate, and to decide whether to increase or decrease the money supply, which the Fed does through buying and selling government securities. For example, to tighten the money supply, or decrease the amount of money available in the banking system, the Fed sells government securities. The meetings of the committee, which are secret, are the subject of much speculation on Wall Street, as analysts try to guess whether the Fed will tighten or loosen the money supply, thereby causing interest rates to rise or fall.

Note2:

The Federal Reserve controls the three tools of monetary policy--open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations.

2. The branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the Board of Governors, which has seven members, and five reserve bank presidents. The president of the Federal Reserve Bank of New York serves continuously, while the presidents of the other reserve banks rotate in their service of one-year terms.

The FOMC meets eight times per year to set key interest rates, such as the discount rate, and to decide whether to increase or decrease the money supply, which the Fed does through buying and selling government securities. For example, to tighten the money supply, or decrease the amount of money available in the banking system, the Fed sells government securities. The meetings of the committee, which are secret, are the subject of much speculation on Wall Street, as analysts try to guess whether the Fed will tighten or loosen the money supply, thereby causing interest rates to rise or fall.