During _____, both the demand for money and the rate of inflation tend to fall, which prompts the Fed to take actions to decrease interest rates.
A)expansions
B)a fiscal deficit occurrence
C)recessions
D)economic booms
E)a foreign trade deficit occurrence

Question

During _____, both the demand for money and the rate of inflation tend to fall, which prompts the Fed to take actions to decrease interest rates. 
A)expansions
B)a fiscal deficit occurrence
C)recessions
D)economic booms
E)a foreign trade deficit occurrence

Quizplus · Accepted Answer

During recessions, there is a decrease in demand for money as people are hesitant to spend and borrow. Additionally, there is a decrease in the rate of inflation as businesses are producing less and demand for goods and services is low. In response, the Fed will typically lower interest rates to encourage borrowing and stimulate economic activity.

During _____, Both the Demand for Money and the Rate