ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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must respond to pressure from the public.
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is concerned about short-term interest rates.
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is concerned about the long-run health of the economy.
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None of the above
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Detailed explanation-1: -Congress has given the Fed two coequal goals for monetary policy: first, maximum employment; and, second, stable prices, meaning low, stable inflation. This “dual mandate” implies a third, lesser-known goal of moderate long-term interest rates.
Detailed explanation-2: -The Fed sets interest rates. Lower rates make it easier for people to borrow and keep money circulating and fueling economic growth. And vice versa. Example: because of the pandemic, the Fed held interest rates near zero in the hopes that cheaper borrowing would help keep consumers spending.
Detailed explanation-3: -It’s part of the Fed’s plan to slow down the demand side of the economy to quell inflation.
Detailed explanation-4: -The correct answer is B. Monetary policy is established by the Federal Open Market Committee. The Federal Reserve System has twelve Federal Reserve banks whereby there is one represented in each Federal Reserve districts.