In an effort to address the troubled economy, ..."For the ninth time in just over a year, the Federal Re is expected to cut interest rates, quite possibly its last reduction in this downturn." Rates have not this low "... since 2003, when the economy was growing at a snail's pace. "
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The Fed's rate cuts will bank reserves and .
A) increase; increase the money supply and real GDP
B) increase; increase the exchange rate and real GDP
C) decrease bank reserves; decrease the exchange rate and real GDP
D) decrease; decrease the money supply and real GDP

Question

Quizplus · Accepted Answer

Cutting interest rates increases bank reserves and the money supply, which in turn stimulates economic growth by increasing real GDP. It does not directly affect the exchange rate.

In an Effort to Address the Troubled Economy