ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Open market sales, decreasing the discount rate.
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Increasing the reserve requirement, decreasing the discount rate.
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Open market purchases, increase the reserve requirement.
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Open market purchases, decreasing the reserve requirement.
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Detailed explanation-1: -The federal reserve system is concerned that the U.S. economy might be on the verge of a deflationary period much like the one suffered by the Japanese. Which of the following actions might the fed take together that will both increase the money supply? A. open market sales, decreasing the discount rate.
Detailed explanation-2: -The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
Detailed explanation-3: -Even so, interest rate hikes are known as the central bank’s one major tool to lower inflation, which it does by raising the cost of borrowing money to curb the demand for goods and services. Economists won’t know until later if the Fed’s moves were successful or not.
Detailed explanation-4: -The Federal Reserve monitors financial system risks and engages at home and abroad to help ensure the system supports a healthy economy for U.S. households, communities, and businesses.
Detailed explanation-5: -Which of the following actions would the Federal Reserve most likely take during an economic recession? During an economic recession, the Fed would want to increase the spending power of citizens.