During periods of slow growth, the Federal Reserve will likely
A) increase the money supply to increase interest rates.
B) increase the money supply to decrease interest rates.
C) decrease the money supply to increase interest rates.
D) decrease the money supply to decrease interest rates.

Question

Quizplus · Accepted Answer

During periods of slow growth, the Federal Reserve will likely increase the money supply to decrease interest rates. This is commonly known as an expansionary monetary policy, aimed at stimulating economic activity by making borrowing cheaper and encouraging investment and spending. By increasing the money supply through measures such as cutting interest rates, the Fed makes it easier for businesses and individuals to access credit, which boosts investment, hiring, and consumption.

During Periods of Slow Growth, the Federal Reserve Will Likely