Asked by Fwendé Renard on Jun 03, 2024
Verified
The best way for Federal Reserve Board officials to help boost a stagnant economy is to
A) raise interest rates so that banks can earn more money on the loans they provide to individuals and businesses.
B) lower interest rates so that banks can provide more loans at cheaper rates to individuals and businesses.
C) take money out of circulation so that the dollar becomes more valuable.
D) raise the reserve requirement,restricting the amount of cash and negotiable securities banks must have on hand.
Stagnant Economy
A situation where an economy experiences minimal to no growth, often characterized by high unemployment and low consumer spending.
Interest Rates
The percentage at which interest is paid by borrowers for the use of money that they borrow from lenders.
- Acquire knowledge about the duties and capabilities of the Federal Reserve in overseeing the U.S. economic system.
- Comprehend the notion of the federal funds rate and its influence on economic conditions.
Verified Answer
EL
Ethan LocklearJun 06, 2024
Final Answer :
B
Explanation :
Lowering interest rates makes it cheaper for businesses and individuals to borrow money, stimulating spending and investment which helps to boost the economy. It also increases liquidity in the markets, making it easier for banks to lend. Conversely, raising interest rates tends to slow down spending and lending, making it more expensive for individuals and businesses to borrow money. Therefore, lower interest rates are the best option to boost a stagnant economy.
Learning Objectives
- Acquire knowledge about the duties and capabilities of the Federal Reserve in overseeing the U.S. economic system.
- Comprehend the notion of the federal funds rate and its influence on economic conditions.