Question

Which is the most accurate statement? The Federal Reserve (LOS) a) markets new Treasury bills, notes, certificates, and bonds b) runs a check clearing operation for U.S. government checks, but does not handle checks written by private individuals or business firms c) Open-Market Committee is part of the U.S. Treasury d) buys and sells chunks of the national debt

Short answer

The most accurate statement is (d) - The Federal Reserve buys and sells chunks of the national debt, which is a function specifically handled by the Federal Open Market Committee (FOMC), a part of the Federal Reserve.

Step-by-step solution

Understanding the Federal Reserve

It's essential to have a basic understanding of the Federal Reserve system. The Federal Reserve functions as the central bank of the United States, and it's primarily tasked with conducting the nation's monetary policy, regulating banking institutions, maintaining the stability of the financial system, and providing financial services to depository institutions, the U.S. government, and foreign official institutions.

Understanding the Federal Open Market Committee (FOMC)

The Federal Open Market Committee (FOMC) is a branch of the Federal Reserve system that is charged with overseeing the nation's open market operations. This means that it's the FOMC's job to handle the buying and selling of government securities, which are instruments used to implement monetary policy.

Evaluate Each Option

(a) The Federal Reserve does not market new Treasury bills, notes, certificates, and bonds, this is a responsibility of the U.S. Treasury. (b) While the Federal Reserve does run a check clearing operation, it does not only handle U.S. government checks, but also handles checks written by private individuals and business firms. (c) The Open-Market Committee is not part of the U.S. Treasury; it's part of the Federal Reserve. (d) The task of buying and selling chunks of the national debt belongs to the FOMC, which is a part of the Federal Reserve.

Conclusion

From the above explanations, the most accurate statement is (d) - The Federal Reserve buys and sells chunks of the national debt. This function is handled specifically by the Federal Open Market Committee (FOMC), which is a part of the Federal Reserve.