Which of these statements best describes the influence of interest rate adjustments by the Federal Reserve?

Question

Quizplus · Accepted Answer

When the Federal Reserve lowers interest rates, it makes borrowing cheaper for businesses and individuals, which can increase spending and stimulate economic growth. It can also increase the available money supply by making it less expensive for banks to borrow from the Federal Reserve, leading to more lending and investment. However, this can also lead to inflation if there is too much money in circulation without corresponding economic growth. Option A is incorrect because interest rate adjustments do not directly affect marginal tax rates. Option B is incorrect because there is no direct relationship between budget deficits and the influence of interest rate adjustments. Option C is incorrect because increasing the cost of money for businesses would decrease borrowing and spending, which could potentially slow down economic growth.

Which of These Statements Best Describes the Influence of Interest