In late 2007, the Fed began a series of cuts in the federal funds rate. Because the core inflation rate was about two percent, the most likely reason for these interest rate cuts was
A)to reduce the natural unemployment rate.
B)to increase the real interest rate.
C)to raise the price of the dollar in the foreign exchange market.
D)to encourage households to save more money.
E)to avoid a recession.

Question

Quizplus · Accepted Answer

The Federal Reserve likely cut interest rates to stimulate economic activity and avoid a recession, especially given the economic conditions during that period.

In Late 2007, the Fed Began a Series of Cuts