Asked by Richard Sullivan on Jun 26, 2024
Verified
Which statement is true?
A) Open market operations are seldom conducted any more.
B) The basic way the Fed controls the money supply is by manipulating the discount rate.
C) During periods of severe recession,the Fed tries to push up interest rates.
D) During periods of severe inflation,the Fed tries to push up interest rates.
Open Market Operations
Central bank activities involving the buying or selling of government securities to control the money supply and interest rates.
Discount Rate
The interest rate set by central banks that is charged to commercial banks for loans, influencing monetary policy and the money supply.
Severe Recession
An unusually deep and prolonged downturn in economic activity that exceeds the standard definition of a recession, often marked by significant declines in GDP and employment.
- Absorb information on the varied tools of monetary policy, inclusive of open market operations, the discount rate, and reserve requirements.
- Examine the repercussions of monetary policy actions on financial institutions and markets.
Verified Answer
NP
Natalie PerezJun 26, 2024
Final Answer :
D
Explanation :
During periods of severe inflation, the Fed tries to push up interest rates to reduce the money supply and curb inflation. Option A is incorrect as open market operations are regularly conducted. Option B is incorrect as while the discount rate is one tool used by the Fed, it is not the basic way the Fed controls the money supply. Option C is also incorrect as during periods of recession, the Fed typically tries to lower interest rates to stimulate borrowing and spending.
Learning Objectives
- Absorb information on the varied tools of monetary policy, inclusive of open market operations, the discount rate, and reserve requirements.
- Examine the repercussions of monetary policy actions on financial institutions and markets.