Joe and Tess McGreen are purchasing their first home in Durham, North Carolina. They are seeking pre-qualification on a home loan. The unemployment rate for North Carolina is 10.2% and GDP is declining. Chances are pretty good that the Fed will raise interest rates in order to loosen the supply of money, resulting in a more expensive loan for Joe and Tess.

Question

Quizplus · Accepted Answer

Raising interest rates typically tightens the money supply, not loosens it. In a declining GDP and high unemployment scenario, the Fed is more likely to lower interest rates to stimulate the economy.

Joe and Tess McGreen Are Purchasing Their First Home in Durham