During normal times, Fed pushes the federal funds down when it wants to give the economy a boost and

Question

Quizplus · Accepted Answer

When the Fed wants to give the economy a boost, it typically lowers the federal funds rate, the interest rate at which banks borrow and lend reserves overnight. This makes it cheaper for banks to borrow money, which in turn stimulates lending and investment. Conversely, when the economy overheats and inflation threatens to rise, the Fed raises the federal funds rate in order to make borrowing more expensive and slow down the pace of economic activity. Therefore, A is the correct answer.

During Normal Times, Fed Pushes the Federal Funds Down When