Multiple Choice
Which of the following actions by banks, in coordination with the Federal Reserve, is most likely to protect the economy during a financial crisis?
18. The Monetary System
The Federal Reserve and the Money Supply
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Which group is responsible for the policy decision of changing the money supply in the United States?
A
Congress
B
Office of Management and Budget (OMB)
C
U.S. Department of the Treasury
D
Federal Open Market Committee (FOMC)
Verified step by step guidance1
Understand the role of different institutions in U.S. economic policy: Congress makes laws and fiscal policy decisions, the Office of Management and Budget (OMB) assists the President in budget preparation, and the U.S. Department of the Treasury manages government revenue and debt.
Recognize that monetary policy, which involves controlling the money supply and interest rates, is distinct from fiscal policy and is typically managed by a specialized group.
Identify the Federal Reserve System as the central bank of the United States, responsible for implementing monetary policy.
Learn that within the Federal Reserve System, the Federal Open Market Committee (FOMC) specifically makes decisions about changing the money supply through open market operations.
Conclude that the group responsible for changing the money supply in the U.S. is the Federal Open Market Committee (FOMC).
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