The Federal Reserve (Fed) can do a few things to help the economy. It can lower the interest rate by which it loans money to banks. This means that banks can lower the rates they give consumers to buy large items such as cars and homes. Lower interest on certificates of deposit can lead investors to put more of their money into stocks.
The Fed can also reduce the reserve ratio which would free up more money for bank lending; this rarely happens, as the people's faith in the banks holding their deposits is key to a sound economy.
The Fed can provide money to central banks in foreign countries when American interests are at stake. This, in turn, ensures that American exports...
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