As the Fed Shifted to a Highly Expansionary Monetary Policy

question 39

Multiple Choice

As the Fed shifted to a highly expansionary monetary policy during the second half of 2008, why were banks reluctant to extend loans and make investments?

• A) Banks did not have enough excess reserves to extend loans and make investments.
• B) The demand for loans was weak and the business climate was uncertain.
• C) The rate of return on short-term investments was high, so banks were reluctant to make long-term investments.
• D) The interest rate that the Fed pays on excess reserves was maintained at a high rate.

---

Definitions:

Pronunciation

The way in which a word or language is spoken, including the sounds and stress patterns.

Performance Review

A periodic evaluation of an employee's job performance by the employer to assess contributions and to provide feedback for future improvement.

Criticism

The examination and judgment of the merits and faults of a work, idea, or action, often with suggestions for improvement.

Emotional Intelligence

The capacity to be aware of, control, and express one's emotions, and to handle interpersonal relationships judiciously and empathetically.