How lower interest rates affect the economy
Suppose that the Federal Reserve acts to lower interest
rates. How this will affect the U.S. economy?
After the economic slowdown that started around the third
quarter of 2000, the Fed lowered interest rates eleven times in the following
year, 2001. What concerns would have about the effort by the Fed to smooth out
this economic recession?
In contrarily, suppose that the Fed unexpectedly increases
the rate of money growth. What are the effect on short-term and long-term
interest rates, and why those effects are different.
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