-In the above figure, if the economy is initially at point D, then if the Fed lowers the federal funds rate

Question

Quizplus · Accepted Answer

When the Federal Reserve lowers the federal funds rate, it becomes cheaper for banks to borrow money. This typically leads to a decrease in other short-term interest rates as well, making borrowing more attractive for consumers and businesses. Lower borrowing costs can stimulate spending and investment, leading to an increase in net exports as the domestic currency may weaken, making exports cheaper and imports more expensive. This increase in overall demand shifts the Aggregate Demand (AD) curve to the right.

-In the Above Figure, If the Economy Is Initially at Point