ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The Federal Reserve Bank
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The President and Congress
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Either A or B
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None of the above
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Detailed explanation-1: -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.
Detailed explanation-2: -The FOMC changes monetary policy primarily by raising or lowering its target for the federal funds rate, the interest rate for overnight borrowing between banks. Lowering the target rate represents an “easing” of monetary policy, while increasing the target rate is a “tightening” of policy.
Detailed explanation-3: -The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy. The Federal Reserve controls the three tools of monetary policy–open market operations, the discount rate, and reserve requirements.
Detailed explanation-4: -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.