Question

Why does the Federal Reserve alter monetary policy?


to provide services to member banks

to enable banks to clear checks

to regulate the banking industry

to lessen the effect of natural business cycles

Answer 1

The primary reason the Federal Reserve alters monetary policy is **to lessen the effect of natural business cycles**. By adjusting interest rates and influencing the money supply, the Fed aims to promote stable economic growth, control inflation, and mitigate the impacts of recessions or economic booms. These adjustments help to stabilize the economy and support the broader goals of maximum employment and stable prices.