Explain the Fed's policy tools and briefly describe how each works. Question content area bottom Part 1 The Fed uses its policy tools to _______. A. keep the government budget debt under $20 trillion by adjusting loans to Congress B. influence the interest rate and regulate the amount of money circulating in the United States by adjusting the reserves of the banking system C. influence the exchange rate and the country's trade balance by adjusting the interest rate D. regulate the amount of money circulating in the United States by printing enough money each year for the purchase of consumer goods and services Part 2 By increasing the required reserve ratio, the Fed forces banks to hold a _______ quantity of monetary base and the interest rate _______. A. smaller; falls B. larger; falls C. smaller; rises D. larger; rises Part 3 By lowering the interest rate, the Fed makes it _______ costly for the banks to borrow monetary base and the interest rate _______. A. less; falls B. more; falls C. less; rises D. more; rises Part 4 When the Fed sells securities in the open market, the monetary base _______ and the interest rate _______. A. decreases; rises