What are the expected economic outcomes when the Fed lowers the discount rate and the target for the federal funds rate?
What will be an ideal response?
By reducing the federal funds rate and the discount rate, the Fed hopes to encourage banks to borrow more reserves, which will allow banks to lend more money. The increased ability to lend on the part of banks plus lower interest rates should stimulate increased consumer and business borrowing and spending. This stimulus should shift the aggregate demand curve to the right.
You might also like to view...
The aggregate production function of an economy shifts upward when ________ produce a higher output
A) the same amount of capital and labor B) the same amount of capital and a higher amount of labor C) a higher amount of capital and labor D) the same amount of labor and a higher amount of capital
A voluntary production reduction program:
A. offers firms incentives to reduce their production voluntarily. B. forces firms to reduce their production. C. offers firms incentives to increase their production voluntarily. D. forces firms to increase their production.
A college student who is enrolled in school full-time and not seeking employment is considered: a. out of the labor force
b. unemployable, and not counted in official statistics. c. employed in leisure. d. underemployed.
The presence of large sunk costs often serves as a naturally imposed barrier to entry.
Answer the following statement true (T) or false (F)