Question

In response to a Federal Reserve interest rate cut, the European Central Bank:

a) Raises the interest rate
b) Keeps the interest rate unchanged
c) Cuts the interest rate
d) Implements a quantitative easing policy

Answer 1

The European Central Bank keeps the interest rate unchanged.

The correct answer is b

Step-by-step explanation:

When the Federal Reserve cuts interest rates, it is implementing an expansionary monetary policy to stimulate economic growth. The purpose of cutting interest rates is to make it cheaper for individuals and businesses to borrow money, which encourages increased spending and investment.

However, the European Central Bank (ECB) is independent from the Federal Reserve and makes its own decisions regarding monetary policy. In response to a Federal Reserve interest rate cut, the ECB may choose to keep its interest rates unchanged, as it has its own unique economic and financial considerations to take into account.

The correct answer is b) Keeps the interest rate unchanged.