ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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cause interest rates to decrease because low interest rates encourage businessgrowth and expansion
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cause interest rates to rise because high interest rates encourage business growthand expansion
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increase the discount rate it charges banks, which would increase the money supply
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increase consumer spending by reducing the money supply
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Detailed explanation-1: -If the Fed wants to stimulate the economy (increase aggregate demand), it will increase the money supply by buying government bonds, lowering the reserve ration, and/or raising the discount rate.
Detailed explanation-2: -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-3: -It is responsible for managing monetary policy and regulating the financial system. It does this by setting interest rates, influencing the supply of money in the economy, and, in recent years, making trillions of dollars in asset purchases to boost financial markets.
Detailed explanation-4: -The Federal Reserve can stimulate a sluggish economy by imposing an expansionary monetary policy. The Federal Reserve, through open market operations, can purchase securities in an open market.