ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Central banks conduct monetary policy by adjusting the supply of money, usually through buying or selling securities in the open market. Open market operations affect short-term interest rates, which in turn influence longer-term rates and economic activity.

Detailed explanation-2: -The Fed’s economic goals prescribed by Congress are to promote maximum employment, stable prices, and moderate long-term interest rates. The Federal Open Market Committee (FOMC or Committee) is responsible for monetary policy decisions to achieve these goals.

Detailed explanation-3: -The Federal Reserve conducts the nation’s monetary policy by managing the level of short-term interest rates and influencing the availability and cost of credit in the economy. Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates.

Detailed explanation-4: -The Board of Governors of the Federal Reserve System and the Federal Open Market Committee (FOMC) determines monetary policy.

Detailed explanation-5: -The Fed implements monetary policy primarily by influencing the federal funds rate, the interest rate that financial institutions charge each other for loans in the overnight market for reserves. Fed monetary policy actions, described below, affect the level of the federal funds rate.