The Federal Reserve tends to take actions to increase interest rates when the economy is strong and to decrease rates when the economy is weak.

Question

Quizplus · Accepted Answer

This statement is mostly true. The Federal Reserve (the Fed) raises interest rates to slow down inflation when the economy is strong, and they lower rates to stimulate borrowing and spending when the economy is weak. However, there are times when the Fed may deviate from this pattern. For example, during the COVID-19 pandemic, the Fed lowered rates to near-zero levels despite the economy being strong before the outbreak. Additionally, the Fed has other tools to influence the economy, such as quantitative easing (buying bonds to inject money into the economy), which can affect interest rates in different ways.

The Federal Reserve Tends to Take Actions to Increase Interest