Asked by Sygie Lamigo on May 05, 2024
Verified
The chairman of the Federal Reserve Board can accelerate economic activity by lowering interest rates.What primary method does the Federal Reserve use to accomplish this?
A) Selling margin requirements
B) Increasing the discount rate
C) Increasing reserve requirements
D) Buying Treasury securities
Discount Rate
The interest rate charged to commercial banks and other financial institutions for loans received from the central bank's discount window.
Treasury Securities
Government bonds issued by the Treasury of a country, considered low-risk investments since they are backed by the government's credit.
- Ascertain the approaches and mechanisms used by the Federal Reserve to steer economic actions.
Verified Answer
JG
Jessica GoveaMay 10, 2024
Final Answer :
D
Explanation :
The Federal Reserve can accelerate economic activity by lowering interest rates primarily through the purchase of Treasury securities. This action increases the money supply by injecting more funds into the banking system, which in turn lowers interest rates and encourages borrowing and investment.
Learning Objectives
- Ascertain the approaches and mechanisms used by the Federal Reserve to steer economic actions.
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