ECONOMICS
MONETARY POLICY
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Yes
|
|
|
No
|
|
|
Either A or B
|
|
|
None of the above
|
Detailed explanation-1: -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-2: -The Federal Reserve sets U.S. monetary policy to promote maximum employment and stable prices in the U.S. economy.
Detailed explanation-3: -It is the Federal Reserve’s actions, as a central bank, to achieve three goals specified by Congress: maximum employment, stable prices, and moderate long-term interest rates in the United States (figure 3.1).
Detailed explanation-4: -When the FRB wants to contract (tighten) the money supply, it will sell Treasury securities to banks in the open market. The securities go into the economy, and the money comes out of the economy.