During the housing market and financial crises of 2007 and 2008, the Fed increased the volume of discount loans in an attempt to
A) reassure financial markets and promote financial market stability.
B) stabilize prices and reduce the growing inflation rate.
C) eliminate structural unemployment to lower the unemployment rate.
D) attract foreign investment and stabilize interest rates.
A
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Explain how the money market determines the equilibrium interest rate
What will be an ideal response?
Whenever a nation has substantial external debts and assets denominated in foreign currency:
A) it is easier to manage, since changes in value are often offsetting. B) there can be large and destabilizing wealth effects. C) its interest payments on the debt will be matched by interest earnings on the assets. D) the risk of default becomes very large.
When economists say that a good is nonrival in consumption, they mean that:
A. no one wants the good. B. everyone wants the good. C. the good is widely available. D. more than one person can enjoy the good at the same time.
Which of the following would be considered a fiscal policy action?
A) The Fed increases the money supply. B) Tax incentives are offered to encourage the purchase of fuel efficient cars. C) Spending on the war in Afghanistan is increased to promote homeland security. D) A tax cut is designed to stimulate spending during a recession.