ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Raising and lowering the minimum wage
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Helping to develop the taxation policies
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Increasing and decreasing government spending
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Raising and lowering short-term interest rates
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Detailed explanation-1: -It is the Federal Reserve’s actions, as a central bank, to achieve three goals specified by Congress: maximum employment, stable prices, and moderate long-term interest rates in the United States (figure 3.1).
Detailed explanation-2: -The Fed uses three primary tools in managing the money supply and pursuing stable economic growth. The tools are (1) reserve requirements, (2) the discount rate, and (3) open market operations. Each of these impacts the money supply in different ways and can be used to contract or expand the economy.
Detailed explanation-3: -Open market operations are the primary way that the Fed tries to change the money supply. If the Fed wants to increase the money supply, it needs to get banks to lend more. The Fed can do one of three things to encourage banks to lend more. It can lower reserve requirements.
Detailed explanation-4: -Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers. Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.