Answer :
When the Fed adjusts its interest rate, it directly influences consumer's; C: Borrowing
What is interest rate?
Interest rates are a monetary policy tool that the Fed uses to regulate the money supply in the economy.
Now, if the fed wants to increase the money supply, it usually lowers the interest rates in order to make the cost of borrowing attractive. However, an increase in interest rate will make borrowing expensive and thus reduces the money in supply.
In conclusion, the Fed uses interest rates to influence the money supply by encouraging or discouraging borrowing of money by firms and households.
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When the Fed adjusts its interest rate, it directly influences consumer borrowing.
What is the Federal Reserve System (Fed)?
The Federal Reserve System (commonly called Fed) is the central banking system in the USA, and this institution determines the interest bank rate.
- The interest rate is defined as the monetary proportion charged by the 'lender' to an individual and/or industry known as the 'borrower'.
- The interest rate is also associated with the proportion of money funds that are gained from a deposit in a given period of time.
In conclusion, when the Fed adjusts its interest rate, it directly influences consumer borrowing.
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