The Federal Reserve can influence the interest rate on home mortgages by:
A. shutting down banks that refuse to follow the federally advised
rate.
B. changing the interest rate it pays banks for their reserves.
C. establishing federal mortgage lenders to compete with private
banks.
D. increasing taxes on all deposits held in its member banks.

Answers

Answer 1

The Federal Reserve can influence the interest rate on home mortgages by changing the interest rate it pays banks for their reserves. Thus, option (b) is correct.

What are interest rates?

Interest rates are the fees associated with pricey borrowing of money. The sum represents a percentage.

The Federal Reserve has the ability to affect mortgage interest rates by increasing the cost of borrowing for banks at the federal funds rate and mortgage rates. Consumer debt is accruing increasing interest rates.

Therefore, option (b) changing the interest rate it pays banks for their reserves is correct.

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