Question

Which of the following is not a function of the Fed?

a. Setting reserve requirements for banks.

b. Advising Congress on fiscal policy.

c. Regulating the supply of money.

d. Serving as a lender of last resort.

Short answer

The correct answer is option b) Advising Congress on fiscal policy.

Step-by-step solution

Step 1. Functions of Federal Reserve

The major functions of the Fed include issuing currency, setting the reserve requirements, lending to financial institutions at the time of emergency, providing for check collection, supervising banks, and managing the money supply.

Step 2. Explanation for the correct answer

The Fed doesn’t advise Congress on fiscal policies. The fiscal policies refer to the tax and other expenditures of the government. In the US, the federal government and administrative authorities take the decision relating to fiscal policies. The Fed is not involved in the fiscal policy determination.

Since advising Congress is not included in the functions, option (b) is incorrect.