Question

A newspaper headline reads: "Fed Cuts Federal Funds Rate for Fifth Time This Year." This headline indicates that the Federal Reserve is most likely trying to:

A. Reduce inflation in the economy
B. Raise interest rates
C. Ease monetary policy
D. Tighten monetary policy

Answer 1

The headline indicating that the Federal Reserve cuts the federal funds rate suggests that the Fed is easing monetary policy to stimulate economic activity and prevent a slowdown or recession.

Step-by-step explanation:

When a newspaper headline reads: "Fed Cuts Federal Funds Rate for Fifth Time This Year," it indicates that the Federal Reserve is most likely trying to C. Ease monetary policy. By reducing the federal funds rate, the Fed is making it cheaper for banks to borrow money from one another, which in turn can lead to lower interest rates for consumers and businesses.

This action is intended to stimulate economic activity by encouraging more borrowing and spending, which can help counteract a slowdown or recession. Lowering the rate is a common strategy during periods of economic uncertainty or downturn to promote growth and prevent deflation. It's part of the Fed's mandate to foster maximum employment and stabilize prices.