During 2001-2004, the Fed Injected Additional Reserves into the Banking

question 104

Multiple Choice

During 2001-2004, the Fed injected additional reserves into the banking system, which reduced the federal funds rate and other short-term interest rates. Other things constant, what is the most likely short-run impact of this policy?

• A) an increase in the rate of unemployment
• B) a reduction in the growth of employment
• C) an increase in aggregate demand and real GDP
• D) a reduction in the long-run rate of inflation

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Definitions:

Employing Class

A term that represents the group of individuals or entities that hire or employ workers, typically used in discussions surrounding labor and economic dynamics.

Wage System

A method or structure for compensating employees based on hours worked, job role, or performance, among other factors.

Aggregated Wealth

The total market value of all financial and non-financial assets owned by a group or country, minus liabilities.

Federation

A union of several groups, states, or organizations that are designed to work together for a common purpose, often seen in government structures or trade unions.