To counter the economic downturn in 2008, the Fed:
A)raised the prime lending rate.
B)cut the federal funds rate.
C)increased the discount rate.
D)lowered taxes.

Question

Quizplus · Accepted Answer

To counter the economic downturn in 2008, the Fed chose to cut the federal funds rate. This decision was taken in order to make it easier for banks to borrow money from the Fed and, in turn, encourage them to lend more money to customers. By reducing interest rates, the Fed hoped to stimulate economic activity and boost consumer spending. Lowering taxes is a fiscal policy decision, not a monetary policy decision made by the Fed. Raising the prime lending rate and increasing the discount rate would have the opposite effect of restricting lending and slowing down economic activity, which is not what the Fed wanted during an economic downturn.

To Counter the Economic Downturn in 2008, the Fed