To decrease the interest rate the Federal Reserve could
A)buy bonds.The fall in the interest rate would increase investment spending.
B)buy bonds.The fall in the interest rate would decrease investment spending.
C)sell bonds.The fall in the interest rate would increase investment spending
D)sell bonds.The fall in the interest rate would decrease investment spending.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys bonds from banks, it increases the reserves available to those banks, which in turn increases the amount of money they can lend out. This increase in the money supply leads to a decrease in interest rates, making it cheaper for businesses and individuals to borrow money. This decrease in interest rates stimulates investment spending, which ultimately leads to economic growth. Therefore, buying bonds would decrease the interest rate while increasing investment spending.

To Decrease the Interest Rate the Federal Reserve Could