ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increase interest rates to lower inflation
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Reduce interest rates to fight a recession
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Provide emergency loans to US banks to prevent a financial crisis
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Increase government spending on space exploration
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Detailed explanation-1: -The Federal Reserve controls the three tools of monetary policy–open market operations, the discount rate, and reserve requirements.
Detailed explanation-2: -The Fed does not provide banking services to consumers. It is tasked with oversight over the banking sector, regulating the money supply in the economy and implementing monetary policies.
Detailed explanation-3: -The Fed can increase the money supply by lowering the reserve requirements for banks, which allows them to lend more money. Conversely, by raising the banks’ reserve requirements, the Fed can decrease the size of the money supply.
Detailed explanation-4: -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.