Question

5. While interest rate actions by the Federal Reserve captures most headlines, what is the most common method for the Federal Reserve Board to try to influence the economy and what does that action entail?

Answer 1

Answer:

The answer is stated below:

Explanation:

It is the mostly often used open market operations to buy the Treasury securities held by the banks. As banks are selling some or few of their securities, the bank have more cash available with them, which in turn increases the supply of the loanable funds and makes banks wiling to lend more amount of cash or money at the lower interest rate.

The common methods that regulate the amount of money in the economy are:

1. Establish or set up the target rates for the federal reserve.

2. Change the interest rate or the discount rate which is charged to the banks when the business cycle changes.