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Chapter 14: Problem 21

The main job of the Fed is to (L.O6) a) control the rate of growth of the money supply b) manage the national debt c) provide low-interest loans to all financial institutions d) raise and lower tax rates

Short Answer

Expert verified
The main job of the Fed (Federal Reserve) is to control the rate of growth of the money supply (option a). This is done to stabilize prices and moderate long-term interest rates in the U.S. economy, which is the Federal Reserve's primary responsibility.

Step by step solution

01

Eliminate irrelevant options

Let's start by eliminating options that are clearly not the main job of the Fed. Options c) and d) can be discarded right away. The Federal Reserve does not provide low-interest loans to all financial institutions, it primarily lends to commercial banks and financial institutions under certain conditions (option c). Additionally, the ability to raise and lower tax rates is the responsibility of the legislative branch of the government, not the Federal Reserve (option d).
02

Decide between the remaining options

Now, we are left with options a) and b). It's true that the Federal Reserve has a role in managing the national debt (option b), but this is not its main job. The Federal Reserve's main job is to control the rate of growth of the money supply (option a). This is done in order to stabilize prices and moderate long-term interest rates in the U.S. economy.
03

Choose the correct answer

Based on the roles and responsibilities of the Federal Reserve, we can conclude that the correct answer is a) control the rate of growth of the money supply. The Federal Reserve implements policies to influence the size of the money supply and the level of interest rates. Therefore, option a) is the most fitting answer to describe the main job of the Fed.

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Most popular questions from this chapter

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