What methods could the Federal Reserve use to stabilize the economy?(1 point)

Question

Responses

The Federal Reserve prevents banks from lending who do not have the reserves to lend.
The Federal Reserve prevents banks from lending who do not have the reserves to lend.

The Federal Reserve increases interest rates to incentivize banks to lend.
The Federal Reserve increases interest rates to incentivize banks to lend.

The Federal Reserve provides loans to banks that cannot obtain loans to prevent shortages in cash.
The Federal Reserve provides loans to banks that cannot obtain loans to prevent shortages in cash.

The Federal Reserve issues money to individuals to stimulate the economy.

Answer 1

To stabilize the economy, the Federal Reserve could utilize the following method:

The Federal Reserve provides loans to banks that cannot obtain loans to prevent shortages in cash.

This method helps ensure liquidity in the banking system, preventing a credit crunch which could further exacerbate economic downturns. The other methods mentioned either do not align with standard practices of the Federal Reserve or are inaccurate representations of its strategies. For example, increasing interest rates typically discourages lending rather than incentivizing it, and directly issuing money to individuals is not a standard practice of the Federal Reserve.