Certified Residential Appraiser Practice Exam

Which entity is responsible for regulating the money supply in the economy?

1. Department of Justice

2. Federal Reserve System

3. U.S. Treasury

4. Consumer Financial Protection Bureau

The correct answer is: Federal Reserve System

The Federal Reserve System is the central banking system of the United States and plays a crucial role in regulating the money supply in the economy. It does this through various monetary policy tools, including open market operations, the discount rate, and reserve requirements. By adjusting these tools, the Federal Reserve can influence interest rates and manage inflation, ensuring economic stability and growth. In contrast, the other entities listed have different functions. The Department of Justice focuses on enforcing federal laws and ensuring fair and equitable law enforcement, not monetary policy. The U.S. Treasury is responsible for managing government revenue, issuing currency, and overseeing fiscal policy rather than directly regulating the money supply. The Consumer Financial Protection Bureau safeguards consumer financial interests and promotes transparency in financial transactions, but it does not regulate the overall money supply. Thus, the Federal Reserve is specifically tasked with controlling the monetary policy of the nation, making it the correct answer.