When the Federal Reserve lowers the federal funds rate, in the short run

Question

Quizplus · Accepted Answer

When the Federal Reserve lowers the federal funds rate, it becomes cheaper for banks to borrow money, meaning that they will have more money available to lend to individuals and businesses. This leads to an increase in the quantity of loans and money supply in the economy, resulting in a shift of the aggregate demand curve to the right. This will typically lead to an increase in economic activity and output in the short run.

When the Federal Reserve Lowers the Federal Funds Rate, in the Short