What did the Federal Reserve do in response to the Great Recession?
What will be an ideal response?
It conducted open market purchases to drive down interest rates.
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Every allocation of goods in a one good world is efficient because:
a. MRSs are equalized. b. there is enough to go around for everyone. c. no one can be made better off without making someone else worse off. d. it doesn't matter to whom an extra unit of the good is given.
Answer the following statements true (T) or false (F)
1. In the multiplier formula, 1/MPS equals the multiplier. 2. If the MPC is five-sixths, the size of the multiplier is 6. 3. If planned investment decreases, the multiplier will decrease the equilibrium income. 4. Various estimates of the multiplier for the U.S. economy place it between 2 and 3, depending on the level of employment. 5. The classical doctrine assumed that the normal equilibrium position for the economy was at full employment.
Governments can affect the level of aggregate demand in a direct way by changing
a. government spending. b. exports. c. taxes. d. transfer payments.
When the government levies a tax on a corporation,
a. all the burden of the tax ultimately falls on the corporation's owners. b. the corporation is more like a tax collector than a taxpayer. c. output must increase to compensate for reduced profits. d. less deadweight loss will occur since corporations are entities and not people who respond to incentives.