ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Promote economic growth through managing the money supply
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Promote higher education by keeping college loan interest rates low
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Keep inflation at a low and steady rate
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Develop strict barriers to entry into the banking system
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Detailed explanation-1: -Tools the Federal Reserve Uses To Control Inflation The Fed has several tools it traditionally uses to tame inflation. It usually uses open market operations (OMO), the federal funds rate, and the discount rate in tandem. It rarely changes the reserve requirement.
Detailed explanation-2: -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-3: -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-4: -For many years, inflation in the United States has run below the Federal Reserve’s 2 percent goal.