The Great Moderation Consensus Agreement That a Decrease in the Interest

question 280

Multiple Choice

The Great Moderation consensus agreement that a decrease in the interest rate was the best policy for fighting a recession was ineffective in the Great Recession because:

• A) the Fed bought government securities, but interest rates did not fall.
• B) interest rates were already close to zero.
• C) financial institutions were engaging in maturity transformation.
• D) Congress increased taxes.

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Definitions:

Checkable Deposits

Deposits in bank accounts that can be withdrawn using checks, debit cards, or digital transactions, comprising a significant part of the money supply.

Required Reserves

are the minimum amounts of funds that banks must hold in reserve against deposits, as mandated by central banks.

Federal Funds Target Rate

The interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight, guided by the Federal Reserve.

Depository Institutions Deregulation

The process of removing or easing government regulations on banks and other depository institutions to enhance efficiency and competitiveness.