When the economy is in a recession, the Fed can _{--------------------}the federal funds rate, which_{--------------------} aggregate demand and _{--------------------}real GDP. A)raise; increases; decreases B)raise; decreases; increases C)lower; increases; increases D)lower; increases; decreases E)lower; decreases; decreases

Question

Quizplus · Accepted Answer

Lowering the federal funds rate makes borrowing cheaper, which encourages spending and investment, thereby increasing aggregate demand and real GDP.

When the Economy Is in a Recession, the Fed Can