ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Raise interest rates
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Lower interest rates
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Either A or B
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None of the above
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Detailed explanation-1: -The Fed can lower interest rates by buying debt securities on the open market in return for newly created bank credit.
Detailed explanation-2: -OMO also affects interest rates because if the Fed buys bonds, prices are pushed higher and interest rates decrease; if the Fed sells bonds, it pushes prices down and rates increase.
Detailed explanation-3: -The Fed raises interest rates to slow the amount of money circulating through the economy and drive down aggregate demand. With higher interest rates, there will be lower demand for goods and services, and the prices for those goods and services should fall.
Detailed explanation-4: -Today, the Fed uses its tools to control the supply of money to help stabilize the economy. When the economy is slumping, the Fed increases the supply of money to spur growth. Conversely, when inflation is threatening, the Fed reduces the risk by shrinking the supply.
Detailed explanation-5: -Use of Labour-intensive Technology. Accelerating Investment in Agriculture. Diversification of Agriculture. Education, Health and Employment Generation. Development of the rural areas. Overhaul of Education system. Need for National Employment Policy (NEP) More items