Question

How does the Federal Reserve System influence the economy?

a. By trading government securities with private financial institutions on the open market
b. All of these are correct Correct
c. By raising and lowering the amount of money financial institutions are required to keep in reserve
d. By raising or lowering the interest rate on short term loans for private financial institutions which are available directly from the Federal Reserve System

Answer 1

The Federal Reserve System influences the economy through trading government securities, adjusting reserve requirements, and changing interest rates.

Step-by-step explanation:

The Federal Reserve System influences the economy through various mechanisms:

By trading government securities with private financial institutions on the open market, the Federal Reserve can impact the money supply and influence interest rates.

By raising or lowering the amount of money financial institutions are required to keep in reserve, the Federal Reserve can control the amount of money that can be lent out and influence the availability of credit.

By raising or lowering the interest rate on short-term loans for private financial institutions, which are available directly from the Federal Reserve System, the Federal Reserve can incentivize or discourage borrowing and spending.

correct option d.. By raising or lowering the interest rate on short term loans for private financial institutions which are available directly from the Federal Reserve System