Answer :
Lower interest rates are often a result of increased money supply, which leads to more investment and more money in consumers' hands, which in turn boosts consumption.
How much room is there to expand the money supply?
By decreasing the reserve requirements for banks, which enables them to lend more money, the Fed can expand the money supply. The Fed can reduce the amount of money in circulation by increasing the reserve requirements for banks, on the other hand.
What will occur if the money supply grows?
A rise in the money supply has two effects: it lowers interest rates, which encourage investment, and it puts more money in the hands of consumers, which makes them feel wealthier and encourages consumption. Businesses place more orders in response to higher sales.
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