If the Fed lowers the federal funds rate, the first effect in an AS/AD figure is a shift of the
Curve.

Question

Quizplus · Accepted Answer

When the Fed lowers the federal funds rate, it becomes cheaper for banks to borrow money, which leads to an increase in the supply of money in the economy. This, in turn, leads to a decrease in interest rates, which stimulates investment and consumption. As a result, aggregate demand (AD) increases and the AD curve shifts rightward.

If the Fed Lowers the Federal Funds Rate, the First