If the Fed lowers its target for the federal funds rate,this indicates that
A)the Fed is pursuing an expansionary monetary policy.
B)the Fed is pursuing a contractionary monetary policy.
C)the Fed is attempting to combat inflation.
D)the Fed is concerned that the growth in aggregate demand will exceed potential GDP.

Question

Quizplus · Accepted Answer

When the Fed lowers its target for the federal funds rate, it is pursuing an expansionary monetary policy. By setting a lower federal funds rate target, the Fed is making it cheaper for banks to borrow money, which should increase the supply of money in the economy and stimulate economic activity. This is typically done during periods of economic weakness or recession in order to encourage borrowing and investment.

If the Fed Lowers Its Target for the Federal Funds