When the Economy Is in a Recession, the Fed Can

question 76

Multiple Choice

When the economy is in a recession, the Fed can _{--------------------}the federal funds rate, which_{--------------------} aggregate demand and _{--------------------}real GDP.

• A)raise; increases; decreases
• B)raise; decreases; increases
• C)lower; increases; increases
• D)lower; increases; decreases
• E)lower; decreases; decreases

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Definitions:

Gold Standard

A monetary system in which the standard economic unit of account is based on a fixed quantity of gold, enabling the conversion of currency into a certain amount of gold on demand.

Financial Policy

A government's strategy for managing its money, including taxation, spending, and borrowing decisions.

Interest-Bearing Bonds

Financial securities that promise to pay periodic interest payments and return the principal amount on a specified maturity date.

Industrial Capitalism

An economic system characterized by private or corporate ownership of capital goods, production for profit, and the predominance of industrial manufacturing and services.