The Federal Reserve uses ____ when it lowers the interest rate charged to banks on short-term loans.
A) monetary policy
B) national debt
C) inflation
D) fiscal policy
E) competition

Question

Quizplus · Accepted Answer

The Federal Reserve uses monetary policy when it lowers the interest rate charged to banks on short-term loans. Monetary policy is the process by which the central bank, in this case the Federal Reserve, manages the supply and demand of money and credit in the economy to achieve specific macroeconomic goals, such as price stability, full employment, and economic growth. Lowering the interest rate charged to banks on short-term loans is one of the tools the Federal Reserve uses to stimulate the economy by encouraging borrowing and spending.

The Federal Reserve Uses ____ When It Lowers the Interest