If the Federal Reserve loosens the money supply to control growth in the economy, _____.

Question

Quizplus · Accepted Answer

When the Federal Reserve loosens the money supply, it can lower interest rates by allowing banks to have more money to lend to individuals and businesses. This is intended to encourage borrowing and spending, which can stimulate economic growth. By reducing interest rates, the cost of borrowing money is also reduced, making it easier for people and businesses to access credit. However, this approach can also lead to inflation if too much money is pumped into the economy, which is why the Federal Reserve must balance its control of the money supply carefully.

If the Federal Reserve Loosens the Money Supply to Control