ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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providing loans directly to consumers.
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offering credit cards to high-risk individuals.
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controlling the money supply.
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all of the above
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Detailed explanation-1: -The Fed can influence the money supply by modifying reserve requirements, which generally refers to the amount of funds banks must hold against deposits in bank accounts. By lowering the reserve requirements, banks are able to loan more money, which increases the overall supply of money in the economy.
Detailed explanation-2: -The Fed controls the supply of money by increas-ing or decreasing the monetary base. The monetary base is related to the size of the Fed’s balance sheet; specifically, it is currency in circulation plus the deposit balances that depository institutions hold with the Federal Reserve.
Detailed explanation-3: -The Federal Reserve, America’s central bank, is responsible for conducting monetary policy and controlling the money supply. The primary tools that the Fed uses are interest rate setting and open market operations (OMO).