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If the Federal Reserve wants to lower the interest rate, it is called: O a) Fiscal policy. O b) Budget surplus. O c) Inflatio

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Answer: (d) Monetary policy

The Central Bank controls the money supply in the economy - this is called as the monetary policy.

The central bank uses the monetary policy tools to control the money supply in the economy.

Monetary policy tools: Interest rates (Bank rates), Reserve requirement and Open market operations.

If the Federal Reserve wants to lower interest rates, it can increase the money supply by buying treasury bills.

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