If the Federal Reserve decreases the Federal funds rate, other short- term interest rates and the exchange rate .

Question

Quizplus · Accepted Answer

When the Federal Reserve decreases the Federal funds rate, it becomes cheaper for banks to borrow money, which leads to a decrease in other short-term interest rates. This decrease in interest rates makes it less attractive for foreign investors to hold U.S. dollars, which leads to a fall in the exchange rate.

If the Federal Reserve Decreases the Federal Funds Rate, Other