Basics of the Federal Reserve Quick Check

Question

3 of 53 of 5 Items
Question
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 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 oversee open market operations and set the target federal funds rate while the Federal Open Market Committee overlooks commercial banks.
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 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 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.
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Answer 1

The correct response is:

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.

This accurately reflects the roles of both entities: the Board of Governors establishes broad monetary policy objectives, while the Federal Open Market Committee (FOMC) makes decisions regarding open market operations and sets key interest rates.