The primary tools that the Federal Reserve uses to influence private spending are
A)changes in taxes.
B)changes in government purchases.
C)changes in financial regulations.
D)changes in interest rates.
E)changes in stock prices.

Question

Quizplus · Accepted Answer

The Federal Reserve primarily uses changes in interest rates to influence private spending. By altering the federal funds rate and other key interest rates, the Fed can encourage or discourage borrowing and economic activity. Changes in taxes and government purchases are fiscal policy tools used by the government, not the Federal Reserve. Financial regulations may influence the behavior of financial institutions, but they are not typically used as a direct tool to influence spending. Changes in stock prices may impact spending decisions by households and firms, but they are not a direct tool used by the Federal Reserve.

The Primary Tools That the Federal Reserve Uses to Influence