California Real Estate Practice Exam

What does the Federal Reserve System do to control the supply of money available for loans among other activities?

1. Print more money

2. Control property taxes

3. Set the discount rate

4. Adjust property values

The correct answer is: Set the discount rate

The Federal Reserve System does not print more money, as this would lead to inflation and decrease the value of the currency. Controlling property taxes is the responsibility of the government and not the Federal Reserve. Adjusting property values also falls under the jurisdiction of local governments. The Federal Reserve controls the supply of money available for loans through setting the discount rate, which is the interest rate that banks pay when they borrow money from the Federal Reserve. By raising or lowering this rate, the Federal Reserve can influence the amount of money banks have available to lend, thus affecting the overall supply of money in the economy.