The most common method for stimulating business and household borrowing from depository institutions is to:
A) reduce the rate of interest.
B) reduce the actual reserves of depository institutions.
C) reduce the excess reserves of depository institutions.
D) pass laws requiring businesses and households to borrow.

Question

Quizplus · Accepted Answer

Reducing the rate of interest makes borrowing cheaper for businesses and households, encouraging them to take out loans for investment or consumption, thereby stimulating economic activity.

The Most Common Method for Stimulating Business and Household Borrowing