Question

Which of these actions of the Federal Reserve can slow economic growth?

Answer 1

You have not described the alternatives, but as an economist I can help you!

The Federal Reserve is the body that decides the direction of US monetary policy. The economic decisions of the agency can be expansive, when they stimulate the economy, or restrictive, when they slow economic growth.

The two main tools the Federal Reserve has in conducting monetary policy are the interest rate and the open market.

We say that monetary policy is restrictive when the Federal Reserve increases the interest rate or sells government bonds (by decreasing the amount of money in circulation). These measures are taken to slow down the economy and prevent the inflationary process.

The opposite occurs when the Federal Reserve buys securities and / or lowers the interest rate, measures that occur to stimulate the economy when economic activity is stagnant.

Answer 2

The Federal Reserve increases the discount rate, which causes interest rates to rise and people to save rather than to spend.