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Styles The Federal Reserve reduced the federal funds interest rate to the level close to zero. Describe how the Fed's policy change affects the money demand and money supply. (You may do a diagram of the money demand and supply and include it with your submission, or you may describe it carefully in your own words.) The Federal Reserve System reduced the federal funds interest rate to the level close to zero during the Coronavirus pandemic in hopes that it would help to revive the economy. When the Federal Reserve reduced the federal funds rate, the money supply within our economy increased. With the money supply increasing, businesses were able to start employing more people, which in turn led to production of needed itenQo increase. With production increases, we were seeing an increase in output. This helped to revive our economy when it was at its worst during the Coronavirus pandemic