If the Federal Reserve lowers the Fed Funds rate, ceteris paribus, the equilibrium levels of funds lent will __________, and the equilibrium level of real interest rates will ___________.

Question

Quizplus · Accepted Answer

When the Federal Reserve lowers the Fed Funds rate, it becomes cheaper for banks to borrow money from each other. This typically leads to an increase in the amount of funds lent as borrowing costs are lower. Additionally, the decrease in the Fed Funds rate generally leads to a decrease in real interest rates as the overall cost of borrowing in the economy falls.

If the Federal Reserve Lowers the Fed Funds Rate, Ceteris