Florida Real Estate Exam

Category - Florida

Which of the following can the Federal Reserve Board do if they feel that there is an inflationary trend developing in the United States?

  1. Increase the discount rate
  2. Enter into the government bond market in a selling capacity
  3. Adjust the amount of reserves required for its member banks
  4. All of the above
Explanation
Answer D - The Federal Reserve Board may want to slow down the inflationary trend by any of these methods. Increasing the discount rate or the amount of reserves required for their member banks decreases the amount of money available for loans and consumer credit buying. Entering into the government bond market in a selling capacity will help them absorb some of the money in the economy so that it cannot be used for credit financing.

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