ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The Federal Reserve regulates the amount of money that flows into and out of the nation’s economy.
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The Federal Reserve buys securities, which puts money back into the hands of people who can spend it in the market place.
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The Federal Reserve decreases the reserve requirement and banks have more money to loan to people who want to borrow it.
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The Federal Reserve increases the discount rate, which causes interest rates to rise and people to save rather than to spend.
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Detailed explanation-1: -Which of these actions of the Federal Reserve can slow economic growth? The Federal Reserve increases the discount rate, which causes interest rates to rise and people to save rather than to spend.
Detailed explanation-2: -When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down. When inflation is too low, the Federal Reserve typically lowers interest rates to stimulate the economy and move inflation higher.
Detailed explanation-3: -Manipulating Interest Rates The first tool used by the Fed, as well as central banks around the world, is the manipulation of short-term interest rates. Put simply, this practice involves raising/lowering interest rates to slow/spur economic activity and control inflation.
Detailed explanation-4: -If the Fed, for example, buys or borrows Treasury bills from commercial banks, the central bank will add cash to the accounts, called reserves, that banks are required keep with it. That expands the money supply.