Asked by Emanuela Tigistu on May 05, 2024

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Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

A) the Federal Reserve is worried about inflation.
B) the Federal Reserve is worried about unemployment.
C) the Federal Reserve is hoping to reduce the demand for goods and services.
D) the Federal Reserve is worried that the economy is growing too quickly.

Federal Reserve

The central banking system of the United States, responsible for monetary policy.

Key Interest Rate

The primary interest rate set by the central bank that is used as the main benchmark for lending rates in the economy and influences overall monetary policy.

Money Supply

The entire gamut of monetary assets within an economy at a designated instance.

  • Understand the role of central banks, particularly the Federal Reserve, in managing economic activity.
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HB
Hannah BeatrixMay 09, 2024
Final Answer :
B
Explanation :
When the Federal Reserve decides to increase the money supply, typically by lowering interest rates, it is often aiming to stimulate economic activity. Lower interest rates make borrowing cheaper, encouraging businesses to invest and consumers to spend, which can help reduce unemployment. This action is not directly aimed at reducing inflation or demand for goods and services, nor is it a response to an economy growing too quickly.