Generally, when the Federal Reserve lowers interest rates, investment spending ________ and GDP ________.
A) increases; decreases
B) increases; increases
C) decreases; decreases
D) decreases; increases

Question

Quizplus · Accepted Answer

When the Federal Reserve lowers interest rates, it becomes cheaper for businesses to borrow money for investment purposes, which usually leads to an increase in investment spending. This increase in investment spending can stimulate economic growth, leading to an increase in GDP. Therefore, investment spending and GDP typically increase when the Federal Reserve lowers interest rates.

Generally, When the Federal Reserve Lowers Interest Rates, Investment Spending