Asked by Lindsey Rowell on May 25, 2024
Verified
While the Federal Reserve's decision to cut the federal funds rate is expected to ________
Economic growth,its decision to raise the federal funds rate is expected to ________
Economic growth.
A) speed up; slow down
B) slow down; speed up
C) have no effect on; speed up
D) have no effect on; slow down
Federal Funds Rate
The interest rate at which depository institutions lend reserve balances to other depository institutions overnight, a key economic policy tool used by the Federal Reserve.
Economic Growth
An increase in the production of goods and services in an economy over a period, reflecting a rise in national income and standard of living.
- Gain insight into the operations and control mechanisms of the Federal Reserve within the U.S. economic framework.
- Acquire knowledge about the federal funds rate and its repercussions on the economy.
Verified Answer
JD
Joanne DuongJun 01, 2024
Final Answer :
A
Explanation :
When the Federal Reserve cuts the federal funds rate, it makes borrowing cheaper for businesses and individuals, which can stimulate economic growth. Conversely, when the Federal Reserve raises the federal funds rate, it makes borrowing more expensive and can slow down economic growth. Therefore, "speed up; slow down" is the most appropriate choice.
Learning Objectives
- Gain insight into the operations and control mechanisms of the Federal Reserve within the U.S. economic framework.
- Acquire knowledge about the federal funds rate and its repercussions on the economy.