California Real Estate Practice Exam

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What is the most direct effect of the Federal Reserve System adjusting the discount rate?

Decreasing inflation
Lowering property taxes
Affecting the stock market
Affecting rates charged for consumer credit

The correct answer is: Affecting rates charged for consumer credit

Adjusting the discount rate is a tool used by the Federal Reserve System to influence the overall economy. By changing the discount rate, the Fed can control the cost of borrowing money for banks and other financial institutions. This, in turn, can affect the rates at which consumers are able to borrow money for things like mortgages, credit cards, and car loans. Therefore, the most direct effect of the Federal Reserve System adjusting the discount rate is on the rates charged for consumer credit. Choices A, B, and C are incorrect because while the Federal Reserve's actions can indirectly impact these factors, they are not the most direct effect of adjusting the discount rate.