ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Decrease the reserve requirement.
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Decrease the discount rate
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Increase interest on reserves
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Buy treasury bonds
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Detailed explanation-1: -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-2: -To keep price inflation in check, the Fed can use its monetary policy tools to raise the federal funds rate.
Detailed explanation-3: -Governments may pursue a contractionary monetary policy, reducing the money supply within an economy. The U.S. Federal Reserve implements contractionary monetary policy through higher interest rates and open market operations.
Detailed explanation-4: -A contractionary policy is a tool used to reduce government spending or the rate of monetary expansion by a central bank to combat rising inflation. The main contractionary policies employed by the United States include raising interest rates, increasing bank reserve requirements, and selling government securities.