When the Fed Lowered the Discount Rate in Late 2008

question 107

Multiple Choice

When the Fed lowered the discount rate in late 2008, the action was ultimately designed to:

• A)increase the money supply.
• B)increase the prime rate.
• C)decrease the monetary base.
• D)increase the reserve requirement.

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Definitions:

Reflex

An automatic, involuntary response to a specific stimulus without conscious thought.

Defense Mechanism

Psychological strategies brought into play by the unconscious mind to protect oneself from anxiety or social sanctions by distorting reality.

Intellectualization

A psychological defense mechanism where reasoning is used to block confrontation with an unconscious conflict and its associated emotional stress, by removing oneself emotionally from a stressful event.

Financial Implications

The potential economic outcomes or consequences associated with a decision, action, or event.