If the target federal funds rate reaches the lower bound:
A. the FOMC would run out of policy options.
B. the FOMC would turn to unconventional measures, such as forward guidance.
C. monetary policy would no longer be of use.
D. the FOMC would simply reset the target.
Answer: B
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How does a per-unit subsidy affect the simple monopoly equilibrium?
a. The subsidy does not affect marginal cost and thus does not affect the monopoly equilibrium. b. The subsidy lowers the price charged by the monopoly, but it also lowers social gain. c. The subsidy increases the monopoly's profit but does not improve social gain. d. The subsidy causes both monopoly output and social gain to increase.
Define the balanced budget multiplier and explain how it works. In your answer, ignore any supply-side effects
What will be an ideal response?
Pollution is caused by a market failure, in an industry in which there is
A. excess demand. B. an over-allocation of resources in production. C. excessive cost borne by the firm. D. unemployment.
In the derivation of TFC, you find
A. the minimum-slope ray out of the origin to the TVC. B. the vertical intercept of the TC and draw a horizontal line. C. the minimum-slope ray out of the origin to the TC. D. the minimum-slope ray out of the origin to the ATC.