In Early in 1994, the Federal Reserve Shifted to a Contractionary

question 18

Multiple Choice

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Jwas still in a recessionary gap left over from the 1990-1991 recession. Which of the
Jfollowing best explains this move?

• A) The Fed was concerned that the budget deficit would increase.
• B) The Fed had failed to take into account the lag in monetary policy.
• C) The Fed was taking explicit account of the lag in monetary policy.
• D) The Fed wanted to avert a potential housing market crisis.

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Definitions:

Epinephrine

Hormone (amino acid derivative) similar in structure to the neurotransmitter norepinephrine; major hormone released from the adrenal medulla; increases cardiac output and blood glucose levels; also called adrenaline.

Coronary Blood Vessels

Arteries and veins that provide blood supply to the heart muscle.

Venous Blood

Blood that is returning to the heart through veins after having circulated through the body, characterized by its dark red color due to lower oxygen content.

Sympathetic Stimulation

Activation of the sympathetic nervous system, resulting in physiological responses such as increased heart rate and blood flow to muscles.