The dramatic collapse in the price of technology stocks in 2001-2003,coupled with a short recession in 2001,caused the Fed to ____ interest rates to stimulate ____.
A) raise;employment
B) lower;employment
C) raise;prices
D) lower;prices

Question

Quizplus · Accepted Answer

The collapse in the price of technology stocks and short recession resulted in a need for the Fed to stimulate the economy. One way to stimulate the economy is to lower interest rates, which would encourage borrowing and spending, leading to an increase in employment. Therefore, the correct answer is B, i.e., lower interest rates to stimulate employment. Option A is incorrect because raising interest rates would make borrowing more expensive, leading to a decrease in spending, and hence, employment. Option C is incorrect because raising interest rates would lead to decreased borrowing, which would result in reduced demand and subsequently reduce prices. Option D is incorrect because lowering interest rates will encourage borrowing, resulting in increased demand and higher prices.

The Dramatic Collapse in the Price of Technology Stocks in 2001-2003,coupled