Question

Which statement is true?

People throughout history have used only currency notes for financial transactions.
The Reserve Banks determine tax rates.
Only the Federal Reserve can buy government securities.
The Federal Reserve affects monetary policy.
The Federal Reserve affects fiscal policy.

Answer 1

The Federal Reserve affects monetary policy. 

Answer 2

The correct answer is C) the Federal Reserve affects the monetary policy.

The statement that is true is "the Federal Reserve affects the monetary policy."

The Federal Reserve is the equivalent of a Central Bank in the United States. The Federal Reserve or Fed tries to maintain a growing economy in the country. Its strategy, people employed and the stability of prices. Sometimes, the Fed adjusts interest rates in the short-term. Lowering interest rates means that money will be cheaper to borrow and less lucrative if investors want to leave their money in the bank.