The Fed can regularly influence and change the risk-free rate of financial investments through its
A)open-market operations.
B)quantitative easing.
C)required reserve ratio.
D)bank supervision.

Question

Quizplus · Accepted Answer

The Fed can influence and change the risk-free rate of financial investments through its open-market operations. This is done by buying or selling government securities, which affects the supply and demand of money in the market and subsequently affects interest rates. The other options (B, C, and D) are tools the Fed uses to influence the overall economy and monetary system but do not solely affect the risk-free rate of financial investments.

The Fed Can Regularly Influence and Change the Risk-Free Rate