10
QuizMultiple Choice

Financial Institutions and Banking — Quiz

Question 10 • Personal Finance

Why does the Fed sometimes increase interest rates?

Answer
A
to slow inflation by stopping the economy from growing too fast
B
to help more people get loans and become borrowers
C
to prevent banks from making profits that are too large
D
to speed up the economy and help it grow quickly

Explanation

The Fed raises interest rates to make borrowing more expensive. This can reduce spending and investment, slowing an economy that is growing too quickly and helping bring inflation down. The correct choice is “to slow inflation by stopping the economy from growing too fast.”

AI-written and checked against the verified answer.