Targeting Interest Rates Can Be Procyclical Because

question 49

Multiple Choice

Targeting interest rates can be procyclical because

• A)an increase in income increases interest rates,causing the Fed to buy bonds,increasing the monetary base and money supply,leading to further increases in income.
• B)an increase in interest rates increases income,causing the Fed to buy bonds,increasing the monetary base and money supply,leading to further increases in income.
• C)an increase in the monetary base increases the money supply,causing the Fed to buy bonds,increasing the monetary base and money supply,leading to further increases in income.
• D)an increase in income increases the monetary base and money supply,causing the Fed to buy bonds to increase interest rates and income.

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