Recall the Application About the Reasons Why Interest Rates Rise

question 64

Multiple Choice

Recall the Application about the reasons why interest rates rise during an economic recovery to answer
the following question(s) . Although higher interest rates are often associated with lower output, interest
rates often start to rise when an economy recovers from a recession and when an economy grows quickly.
As an example, in 2005, a year in which real GDP grew very rapidly,interest rates on 3 -month Treasury
bills rose from 2.3 percent at the beginning of the year to 3.9 percent by the end of the year.
-Recall the Application. If, during an economic recovery, interest rates rose too fast and negatively impacted the recovery, what might the Fed do to reverse this impact?

• A)decrease the liquidity demand for money
• B)make an open market purchase
• C)increase reserve requirements
• D)increase the discount rate

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