Reducing the fed funds rate can increase GDP in the short term because at lower interest rates
A) individuals and businesses will want to borrow and spend more.
B) households will attempt to save more.
C) banks will earn greater profits on loans.
D) taxes are lower, which increases disposable income.

Question

Quizplus · Accepted Answer

Lower interest rates make borrowing cheaper and more attractive to individuals and businesses. This can lead to increased spending on investment projects, homes, and other goods and services, which can boost GDP in the short term.

Reducing the Fed Funds Rate Can Increase GDP in the Short