Why does the Federal Reserve alter monetary policy?

Question

A.
to enable banks to clear checks

B.
to lessen the effect of natural business cycles

C.
to provide services to member banks

D.
to regulate the banking industry

Answer 1

The correct answer is B. to lessen the effect of natural business cycles.

The Federal Reserve alters monetary policy to influence economic activity, aiming to stabilize the economy, control inflation, and promote maximum employment. By adjusting interest rates and controlling the money supply, the Fed seeks to mitigate the effects of economic fluctuations or business cycles.