Question

2)-the federal reserve conducts monetary p which is best defined as:

a. international lending to needy governments.

b. lending to the u. s. government when it runs a budget deficit.

c. holding deposits for commercial banks to facilitate the payments system.

d. manipulating the size and growth of the money supply to improve economic performance.

Explanation:

To determine the correct definition of monetary policy conducted by the Federal Reserve, we analyze each option:

• Option a: International lending to governments is not related to U.S. monetary policy.
• Option b: Lending to the U.S. government for budget deficits is related to fiscal policy or government borrowing, not monetary policy.
• Option c: Holding deposits for commercial banks (reserves) is part of the Fed's role but not the definition of monetary policy.
• Option d: Monetary policy involves actions to control the money supply (size and growth) to influence economic performance (e.g., inflation, employment), which matches the Fed's monetary policy goals.

Answer:

d. Manipulating the size and growth of the money supply to improve economic performance.