When the Fed increases the money supply,it generally has the effect of
A)Making banks more profitable
B)Increasing the value of stocks
C)Lowering interest rates
D)Lowering the inflation rate
E)Increasing the size of bank deposits

Question

Quizplus · Accepted Answer

When the Fed increases the money supply, it injects more money into the economy, which lowers the demand for money and drives down interest rates. This makes borrowing cheaper, which stimulates investment and consumption, spurring economic growth. Lower interest rates also make it cheaper to borrow for businesses and individuals, which can lead to more spending and investment.

When the Fed Increases the Money Supply,it Generally Has the Effect