Federal Reserve policymakers cut their short-term interest rate target an aggressive half-point to 2% on Tuesday… This cut was the Fed’s 10th attempt this year to support the U.S. economy, which is still weakening after Sept. 11 attacks. The moves represent some of the most furious rate-cutting in Fed history… Fed officials have now pushed the rate banks charge each other for overnight loans to its lowest level since 1961…Major banks lowered the prime rate in [lockstep] with the Fed, bringing down to 5% from 5.5%. That translates into lower rates for home-equity loans, business loans, and some credit cards.
By taking the actions described in the passage above, the Fed was likely trying to:
decrease business activity
decrease the money supply
increase the amount of money that banks must keep in reserves
increase business activity