A decrease in the federal funds rate leads to

Question

Quizplus · Accepted Answer

A decrease in the federal funds rate typically leads to an increase in the quantity of money as lower interest rates make borrowing cheaper, encouraging banks to lend more. This can also lead to a fall in the exchange rate, as lower interest rates make a country's financial assets less attractive to foreign investors, reducing demand for the country's currency. A weaker currency makes exports cheaper and more competitive abroad, potentially increasing exports.

A Decrease in the Federal Funds Rate Leads to