Chapter 15, Problem 4AA

To determine

To choose: The suitable word that best completes the sentence.

Explanation of Solution

The suitable word that best completes the sentence is assist.

The main work of Fed is to continue the money supply in the economy and keep the economy running smoothly. The Fed tries to control the money supply in case of both inflation and recession. This is done by changing the reserve requirements of the financial institutions. Fed has set specific reserve requirements for banks. Banks has to hold certain percentage of their deposits as cash. Hence, the Federal Reserve assists banks by holding excess of their reserves.

Economics Concept Introduction

Introduction:

Federal Reserve- The Federal Reserve was formed in the year 1913 by Congress to act as the central banking organization of nation. It is a system or network of banks. The Federal Reserve or Fed is the body responsible for forming the monetary policies in the United States.