Multiple Choice
Which of the following can a country increase in the long run by increasing its money growth rate?
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1. Introduction to Macroeconomics
Introduction to Economics
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Which of the following is the basic economic policy function of the Federal Reserve Banks?
A
Setting fiscal policy by determining government spending and taxation
B
Conducting monetary policy to influence the supply of money and credit
C
Managing the federal budget deficit
D
Regulating international trade agreements
Verified step by step guidance1
Understand the role of the Federal Reserve Banks in the U.S. economy, which primarily involves managing the nation's money supply and credit conditions.
Recall that fiscal policy, which includes government spending and taxation decisions, is set by the government (Congress and the President), not the Federal Reserve.
Recognize that the Federal Reserve's main function is to conduct monetary policy, which means influencing interest rates, controlling inflation, and stabilizing the financial system by regulating the supply of money and credit.
Note that managing the federal budget deficit is the responsibility of the Treasury Department and Congress, not the Federal Reserve.
Understand that regulating international trade agreements falls under the jurisdiction of the government and trade organizations, not the Federal Reserve Banks.
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