What is one of the things the Federal Reserve System does?
A.
set income tax rates at the federal level
B.
influence interest rates
C.
decide who can open bank accounts
D.
give loans to bank customers
B. influence interest rates
One of the things that the Federal Reserve System does is influence interest rates. To understand how the Federal Reserve influences interest rates, you need to understand its role in the U.S. economy.
The Federal Reserve, also known as the central bank of the United States, is responsible for regulating and overseeing the country's banking and financial system. One of the tools the Federal Reserve uses to manage the economy is the control of interest rates.
When the Federal Reserve wants to stimulate economic growth, it may lower interest rates. Lower interest rates encourage borrowing and investment because it becomes cheaper for individuals and businesses to borrow money. This increased borrowing and investment can lead to increased economic activity.
Conversely, when the Federal Reserve wants to slow down economic growth to prevent inflation, it may raise interest rates. Higher interest rates make borrowing more expensive, which can discourage individuals and businesses from borrowing and investing. This can help to control inflation by reducing excessive spending.
Overall, the Federal Reserve uses its power to influence interest rates as a monetary policy tool to help manage inflation and economic growth.