Finance
The Federal Reserve's primary tool for influencing mortgage interest rates is:
ASetting maximum mortgage rates by law
BAdjusting the federal funds rate, which influences short-term and long-term interest rates throughout the economy✓ Correct
CPurchasing all FHA-insured mortgages
DApproving all mortgage applications over $500,000
Explanation
The Federal Reserve influences interest rates primarily through adjusting the federal funds rate (the rate banks charge each other for overnight loans). When the Fed raises rates, borrowing costs typically increase throughout the economy, including mortgage rates. Mortgage rates are also influenced by the bond market, particularly the 10-year Treasury yield.
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