Question

Question: The Fed's policy tools to fulfill its dual mandate of price stability and economic growth and to enhance the functioning of the financial markets consist of all of the following except: A Cut the rate on direct loans from its discount window to banks B Buying equity in undervalued, US firms C Setting the Fed Funds rate D Buying Treasury securities and mortgage backed securities E Encouraging banks to lend more without worrying about their capital buffers

Answer 1

Solution: Encouraging banks to lend more without worrying about their capital buffers

Explanation: The Fed as a monetary authority would require banks to keep a percentage of it's capital in a buffer or reserve account