ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Influencing supply of money and credit
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Make sure plenty of money is in circulation
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Either A or B
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None of the above
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Detailed explanation-1: -For instance, the Fed’s purchase of bonds puts more money into the financial system and thus reduces the cost of borrowing. At the same time, the Fed can also make loans to commercial banks, at an interest rate that it sets (known as the discount rate) to increase the money supply.
Detailed explanation-2: -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.
Detailed explanation-3: -The Fed has traditionally used three tools to conduct monetary policy: reserve requirements, the discount rate, and open market operations.