The Federal Reserve Controls the Money Supply Through All of the Following

question 46

Multiple Choice

The Federal Reserve controls the money supply through all of the following actions EXCEPT

• A)raising the percentage of funds members banks are required to hold in reserve.
• B)raising the interest rate that member banks are charged when they borrow from the Federal Reserve.
• C)lowering the percentage of funds members banks are required to hold in reserve.
• D)lowering the interest rate that member banks are charged when they borrow from the Federal Reserve.
• E)lowering the tax rate on individuals.

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Definitions:

Bank Lending

The process by which banks offer loan products to customers, thereby generating profits from the interest charged.

Loanable Funds

The market where savers supply funds for loans to borrowers.

Borrowers

Individuals or entities that take funds from a lender with the intention of paying back the borrowed amount plus interest.

Downsloping

A term describing a downward trend or decrease, often used in economics to refer to declining prices or demand curves that slope downwards as price increases.