Multiple Choice
Which of the following best explains why an unexpected increase in total spending will cause an increase in GDP?
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1. Introduction to Macroeconomics
Introduction to Economics
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Which of the following is determined by the Board of Governors of the Federal Reserve System?
A
The level of government spending
B
The minimum wage
C
The discount rate charged to commercial banks
D
The federal income tax rates
Verified step by step guidance1
Step 1: Understand the role of the Board of Governors of the Federal Reserve System. They are responsible for overseeing the Federal Reserve Banks and helping implement monetary policy in the United States.
Step 2: Recognize that the Board of Governors does not set fiscal policy variables such as government spending or federal income tax rates. These are determined by Congress and the Treasury Department.
Step 3: Know that the minimum wage is set by the Department of Labor and is not related to the Federal Reserve's responsibilities.
Step 4: Identify that the discount rate is the interest rate charged by the Federal Reserve to commercial banks for short-term loans, and this rate is set by the Board of Governors.
Step 5: Conclude that among the options given, the discount rate charged to commercial banks is the one determined by the Board of Governors of the Federal Reserve System.
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