Asked by Emanuela Tigistu on May 05, 2024
Verified
Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because
A) the Federal Reserve is worried about inflation.
B) the Federal Reserve is worried about unemployment.
C) the Federal Reserve is hoping to reduce the demand for goods and services.
D) the Federal Reserve is worried that the economy is growing too quickly.
Federal Reserve
The central banking system of the United States, responsible for monetary policy.
Key Interest Rate
The primary interest rate set by the central bank that is used as the main benchmark for lending rates in the economy and influences overall monetary policy.
Money Supply
The entire gamut of monetary assets within an economy at a designated instance.
- Understand the role of central banks, particularly the Federal Reserve, in managing economic activity.
Verified Answer
HB
Hannah BeatrixMay 09, 2024
Final Answer :
B
Explanation :
When the Federal Reserve decides to increase the money supply, typically by lowering interest rates, it is often aiming to stimulate economic activity. Lower interest rates make borrowing cheaper, encouraging businesses to invest and consumers to spend, which can help reduce unemployment. This action is not directly aimed at reducing inflation or demand for goods and services, nor is it a response to an economy growing too quickly.
Learning Objectives
- Understand the role of central banks, particularly the Federal Reserve, in managing economic activity.
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