ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Higher interest rates reduce demand by making borrowing more expensive, which slows economic growth and damps price pressures in the economy. Interest rates should rise when unemployment falls because consumers are likely to start borrowing more and spending more with high employment and faster wage growth.

Detailed explanation-2: -The federal funds rate is the suggested interest at which banks lend money to each other and was designed to help keep the U.S. economy operating smoothly.

Detailed explanation-3: -When central banks like the Fed change interest rates, it has a ripple effect throughout the broader economy, affecting both stock and bond markets in different ways. Lowering rates makes borrowing money cheaper. This encourages consumer and business spending and investment and can boost asset prices.

Detailed explanation-4: -It is responsible for managing monetary policy and regulating the financial system. It does this by setting interest rates, influencing the supply of money in the economy, and, in recent years, making trillions of dollars in asset purchases to boost financial markets.