ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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provide financial services for commercial banks
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maintain stability of the financial system
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use changes in the money supply to fight recessions or inflations
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None of the above
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Detailed explanation-1: -Definition: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.
Detailed explanation-2: -Fiscal consolidation, limiting debt Central banks are raising interest rates to dampen demand and contain inflation, which in many countries is at its highest levels since the 1980s. Because rapid price gains are costly to society and detrimental to stable economic growth, monetary policy must act decisively.
Detailed explanation-3: -Monetary policy can offset a downturn because lower interest rates reduce consumers’ cost of borrowing to buy big-ticket items such as cars or houses. For firms, monetary policy can also reduce the cost of investment.
Detailed explanation-4: -Conducting monetary policy The basic approach is simply to change the size of the money supply. This is usually done through open-market operations, in which short-term government debt is exchanged with the private sector.