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Economics

Suppose the Federal Reserve announces that it is lowering its target interest rate by 75 basis points, or 0.75%. It would achieve this by (decreasing/increasing) the (money supply/money demand)

The sequence of events that results in a new equilbruim interest rate, adter the Fed makes the change you selected, may be dicribed as follows: Becasue there is (more / less) money in the financial system, the quantity of interest-bearing financial assets (such as bonds) demanded (increases/decreses), which means that bond issuers (can issue bonds at lower interest rates and still / must raise the interest rate they pay to ) sell bonds. This process continues until the new equilibrium interest rate is achieved.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91949963

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