The Federal Reserve lowers interest rates. As a result, in the short run, real GDP _ and the price level .
A) increases; rises
B) decreases; falls
C) increases; falls
D) decreases; rises

Question

Quizplus · Accepted Answer

Lowering interest rates stimulates borrowing and spending, increasing aggregate demand and leading to an increase in real GDP. This increase in demand can also lead to an increase in the price level in the short run due to higher production costs and limited supply capabilities.

The Federal Reserve Lowers Interest Rates