In an effort to address the troubled economy, ..."For the ninth time in just over a year, the Federal Reserve is expected to cut interest rates, quite possibly its last reduction in this downturn." Rates have not been this low "... since 2003, when the economy was growing at a snail's pace." www.csmonitor.com, 10/28/2008
The Fed's rates cuts will initially impact ________ and eventually ________.
A) bank reserves; government spending
B) the money supply; bank reserves
C) bank reserves; real GDP
D) investment; the real interest rate

Question

Quizplus · Accepted Answer

The Fed's rate cuts initially impact bank reserves by increasing them, which eventually affects real GDP by stimulating economic activity.

In an Effort to Address the Troubled Economy