What are the expected economic outcomes when the Fed lowers the discount rate and the target for the federal funds rate?
What will be an ideal response?
By reducing the federal funds rate and the discount rate, the Fed hopes to encourage banks to borrow more reserves, which will allow banks to lend more money. The increased ability to lend on the part of banks plus lower interest rates should stimulate increased consumer and business borrowing and spending. This stimulus should shift the aggregate demand curve to the right.
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When the domestic currency strengthens under a fixed exchange-rate system, this is called
A) a depreciation. B) an appreciation. C) a devaluation. D) a revaluation.
If any country decides to exit from the Eurozone, it will gain ________
A) free capital mobility B) a fixed exchange rate C) reduced transactions costs D) monetary policy independence