ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An increase in welfare payments
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An increase in exports
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A decrease in savings by consumers
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A decrease in the required reserve ratio
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An open market sale by the Federal Reserve
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Detailed explanation-1: -It is responsible for managing monetary policy and regulating the financial system. It does this by setting interest rates, influencing the supply of money in the economy, and, in recent years, making trillions of dollars in asset purchases to boost financial markets.
Detailed explanation-2: -Economic recessions can be caused by many different elements, including loss of consumer confidence, high interest rates, a stock market crash, and asset bubbles bursting. Most events that will cause the economy to slow down can also lead to a recession if left unchecked.
Detailed explanation-3: -The Fed has several monetary policy tools it can use to fight off a recession. It can lower interest rates to spark demand and increase the amount of money in circulation via open market operations (OMO), including quantitative easing (QE), through which additional types of assets may be purchased by the Fed.
Detailed explanation-4: -The Federal Reserve can stimulate a sluggish economy by imposing an expansionary monetary policy. The Federal Reserve, through open market operations, can purchase securities in an open market.