D. The Federal Reserve raises the rate in order to encourage banks to lend less.
Who Controls Interest Rates?
A country's significant bank controls interest charges. Adjusting hobby charges to spur or slow down the economic system is part of financial policy, which a crucial financial institution is accountable. Governments are answerable for economic policy, which entails adjusting taxes.
As hobby prices grow, the value of borrowing cash turns extra expensive. This makes buying sure items and services, such as homes and motors, greater high-priced. This in turn causes customers to spend much less, which reduces the demand for goods and offerings. If the call for goods and services decreases, companies reduce again on manufacturing, laying off people, which will increase unemployment. typical, a boom in hobby rates slows down the financial system. Decreases in hobby fees have the other effect.
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