If the Fed lowers the federal funds rate, then

Question

Quizplus · Accepted Answer

When the Fed lowers the federal funds rate, it makes it cheaper for banks to borrow money, which in turn leads to lower interest rates for consumers and businesses. This leads to an increase in borrowing and spending, which can stimulate aggregate demand through a multiplier process. However, the other options are incorrect as a lower federal funds rate would typically lead to a weaker dollar and potentially an increase in net exports, as well as an increase in investment and consumption expenditure.

If the Fed Lowers the Federal Funds Rate, Then