Question

What would MOST LIKELY happen if the Federal Reserve System lowered interest rates? A) Trade would increase over the long run. B) Unemployment would be reduced in the short run. C) The demand for goods would decrease in the short run. D) The price of goods would remain stable over the long run.

Answer 1

Unemployment would be reduced in the short run

Answer 2

Option B, Unemployment would be reduced in the short run, is the right answer.

Step-by-step explanation:

Option B is correct because lowering the interest rate by the federal bank will make the borrowing cheaper. When the borrowing will be cheap then the companies or firm will increase their investment and output. Thus, to increase the output, the workforce will be required. Consequently, employment will generate in the economy and this is how unemployment would be reduced in the short run.