Since 2002, the Fed Has Shifted to Expansionary Monetary Policy

question 44

Multiple Choice

Since 2002, the Fed has shifted to expansionary monetary policy, then to restrictive policy, and then back to expansionary monetary policy. Policy shifts of this type are most likely to

• A) promote economic stability and stimulate employment.
• B) keep the general level of prices relatively stable because the periods of restrictive policy will just offset the periods of expansion.
• C) help promote economic stability because changes in monetary policy can be counted on to exert a predictable impact on the economy quickly.
• D) promote instability because the time lags of monetary policy are long and variable.

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Definitions:

Inelastic Portion

The segment of the demand curve where consumers are relatively unresponsive to price changes.

Total Revenue

The total amount of money a firm receives from selling its products or services.

Price Elasticity

The measure of how much the quantity demanded of a good responds to a change in the price of that good, often influencing pricing strategies.

Constant Slope

Refers to a linear relationship plotted on a graph where the rate of change between the variables remains unchanged across the graph.