In taking the actions described in the passage, the Fed was trying toFederal Reserve policymakers cut their short-term interest rate target an aggressive half-point to 2% Tuesday ..... This cut was the Feds 10th attempt this year to shore up the U.S. economy, which is still weakening after the Sept. 11 attacks. The moves represent some of the most furious rate-cutting in Fed history ..... Fed officials have now pushed the rate banks charge each other for overnight loans to its lowest level since 1961 ..... Major banks lowered the prime rate in [lockstep] with the Fed, bringing it down to 5% from 5.5%. That translates into lower rates for home-equity loans, business loans, and some credit cards.In taking the actions described in the passage, the Fed was trying to

MONETARY POLICY

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

In taking the actions described in the passage, the Fed was trying toFederal Reserve policymakers cut their short-term interest rate target an aggressive half-point to 2% Tuesday ____ This cut was the Fed’s 10th attempt this year to shore up the U.S. economy, which is still weakening after the Sept. 11 attacks. The moves represent some of the most furious rate-cutting in Fed history ____ Fed officials have now pushed the rate banks charge each other for overnight loans to its lowest level since 1961 ____ Major banks lowered the prime rate in [lockstep] with the Fed, bringing it down to 5% from 5.5%. That translates into lower rates for home-equity loans, business loans, and some credit cards.In taking the actions described in the passage, the Fed was trying to

A	increase the amount banks keep on reserve.
B	decrease the money supply.
C	increase business activity.
D	decrease business activity.

Explanation:

Detailed explanation-1: -Which of the following actions did the Fed take in response to the mortgage debt crisis?-lowered the federal funds rates.

Detailed explanation-2: -The Fed has traditionally used three tools to conduct monetary policy: reserve requirements, the discount rate, and open market operations.

Detailed explanation-3: -To increase the (growth of the) money supply, the Fed could either buy bonds, lower the reserve requirement ratio, or lower the discount rate. To decrease the (growth of the) money supply, the Fed could either sell bonds, raise the reserve requirement ratio, or raise the discount rate. 24.

Detailed explanation-4: -The Federal Reserve monitors financial system risks and engages at home and abroad to help ensure the system supports a healthy economy for U.S. households, communities, and businesses.

There is 1 question to complete.

ECONOMICS (CBSE/UGC NET)

ECONOMICS

MONETARY POLICY