How does the role of the Board of Governors compare to the role of the Federal Open Market Committee?(1 point)
Responses
The Board of Governors direct monetary policy while the Federal Open Market Committee oversees open market operations as well as sets the target federal funds rate and discount rate.
The Board of Governors direct monetary policy while the Federal Open Market Committee oversees open market operations as well as sets the target federal funds rate and discount rate.
The Board of Governors direct monetary policy and set the discount rate while the Federal Open Market Committee oversees open market operations and sets the target federal funds rate.
The Board of Governors direct monetary policy and set the discount rate while the Federal Open Market Committee oversees open market operations and sets the target federal funds rate.
The Board of Governors set the target federal funds rate while the Federal Open Market Committee implements the policies from the Board of Governors and sets the discount rate.
The Board of Governors set the target federal funds rate while the Federal Open Market Committee implements the policies from the Board of Governors and sets the discount rate.
The Board of Governors oversee open market operations and set the target federal funds rate while the Federal Open Market Committee overlooks commercial banks.
The Board of Governors direct monetary policy and set the discount rate while the Federal Open Market Committee oversees open market operations and sets the target federal funds rate.
The correct response is:
The Board of Governors direct monetary policy and set the discount rate while the Federal Open Market Committee oversees open market operations and sets the target federal funds rate.
The correct answer is: The Board of Governors direct monetary policy and set the discount rate while the Federal Open Market Committee oversees open market operations and sets the target federal funds rate.
To understand the roles of the Board of Governors and the Federal Open Market Committee (FOMC), it is important to have a basic understanding of the Federal Reserve System. The Federal Reserve is the central bank of the United States and is responsible for maintaining price stability and supporting economic growth.
The Board of Governors is the main governing body of the Federal Reserve System. It consists of seven members who are appointed by the President and confirmed by the Senate. The Board of Governors is responsible for formulating and implementing monetary policy, which involves managing the money supply, controlling interest rates, and ensuring the stability of the financial system.
The Federal Open Market Committee is a committee within the Federal Reserve System that is responsible for conducting open market operations and implementing monetary policy decisions. The FOMC is composed of twelve members, including the seven members of the Board of Governors and five regional Reserve Bank presidents.
Open market operations refer to the buying and selling of government securities (such as Treasury bonds) on the open market. These operations are used to control the money supply and influence interest rates. The FOMC oversees these operations and makes decisions on how much and what types of securities to buy or sell.
Additionally, the FOMC sets the target federal funds rate. The federal funds rate is the interest rate at which banks and other depository institutions lend money to each other overnight to meet reserve requirements. By setting the target federal funds rate, the FOMC influences short-term interest rates and, in turn, economic activity.
On the other hand, the Board of Governors is responsible for setting the discount rate. The discount rate is the interest rate charged by the Federal Reserve to commercial banks and other depository institutions for short-term loans. By setting the discount rate, the Board of Governors directly influences the cost of borrowing for banks and ultimately affects lending rates in the economy.
In summary, the Board of Governors directs monetary policy and sets the discount rate, while the Federal Open Market Committee oversees open market operations and sets the target federal funds rate. Both entities play important roles in managing the economy and maintaining financial stability.