A problem that the Fed faces when it attempts to control the money supply is that
a. since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers.
b. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
c. while the Fed has the ability to change the money supply by a large amount, it does not have the ability to change it by a small amount.
d. federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks.
Answer: a. since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers.
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What will be an ideal response?
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