Assume the Fed wants to lower the interest rate. How does the Fed lower the interest rate in the short run?
What will be an ideal response?
In order to lower the interest rate, the Fed increases the quantity of money. In the short run, when the quantity of money increases, the interest rate falls.
Economics
You might also like to view...
Implementing a regional free-trade agreement may have an effect in which, due to reduced tariffs, a nation in the agreement begins to import a product it had previously produced itself. This effect is called:
a. trade creation. b. trade diversion. c. reciprocal trade agreements. d. the employment effect of FTAs.
Economics
Refer to the diagram above. The straight line E drawn through the wavy lines would provide an estimate of the:
Recovery trend Recession fluctuation Natural rate of unemployment Economic growth trend
Economics