Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

Which of the following is considered a traditional role of the Federal Open Market Committee?

1. Setting tax rates

2. Controlling bank mergers

3. Conducting open-market operations

4. Printing money

The correct answer is: Conducting open-market operations

The role of the Federal Open Market Committee (FOMC) primarily involves conducting open-market operations, which is a key tool used to regulate the money supply and influence interest rates in the economy. By buying and selling government securities, the FOMC can either inject liquidity into the economy or withdraw it, thereby affecting overall economic activity. This responsibility is aligned with the committee's objectives of promoting maximum employment, stable prices, and moderate long-term interest rates. Open-market operations are crucial for implementing monetary policy and are an essential function of the FOMC, making it a traditional role of this committee. Other options like setting tax rates, controlling bank mergers, and printing money are responsibilities that fall outside of the FOMC's purview. Tax rates are determined by legislative bodies, bank mergers are regulated by various financial authorities, and the actual printing of money is managed by the U.S. Treasury and the Bureau of Engraving and Printing, not the FOMC directly. Thus, conducting open-market operations stands out as a fundamental function of the FOMC in the context of monetary policy.