Which statement accurately explains the functions of the Federal Reserve district banks and those for the Board of Governors.

Question

A. The Federal Reserve district banks set the target federal funds rate and oversee open market operations while the Board of Governors direct monetary policy and set reserve requirements on banks.

B. The Federal Reserve district banks direct monetary policy and overlook the banking industry while the Board of Governors implement the policies from the district banks.

C. The Board of Governors set the target federal funds rate and overlook the banking industry while the Federal Reserve district banks implement the policies from the Board of Governors.

D. The Board of Governors set the discount rate and reserve requirements on banks while the Federal Reserve district banks overlook the banking industry and implement the policies from the Board of Governors.

Answer 1

The correct statement is:

C. The Board of Governors set the target federal funds rate and overlook the banking industry while the Federal Reserve district banks implement the policies from the Board of Governors.

In this context:

• The Board of Governors is responsible for setting key monetary policy tools, including the target federal funds rate and reserve requirements.
• The Federal Reserve district banks implement these policies and oversee the banking industry within their respective regions.