After the Financial Crisis of 2007-2009, Why Did the Federal

question 278

Multiple Choice

After the financial crisis of 2007-2009, why did the Federal Reserve effectively lose its ability to increase the money supply by manipulating the federal funds rate target?

• A)Regulatory changes in response to the financial crisis significantly restricted the use of the federal funds rate target.
• B)The increase in excess reserves in the banking system virtually eliminated the need for banks to borrow in the federal funds market.
• C)Borrowing of excess reserves moved from traditional banks to the shadow banking industry.
• D)The federal funds rate rose significantly and would not respond to Fed changes in the supply of reserves.

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Definitions:

Demand for Labor

The total amount of workers that employers want to hire at a given wage rate, in a given time period.

Union Membership

Involvement in an organized association of workers formed to protect and further their rights and interests in the workplace.

Labor Force

The total number of people, both employed and unemployed, who are actively looking for work in the economy.

Inclusive Union

A labor union that aims to represent all workers within a particular industry or workplace, regardless of job or skill level, focusing on broad inclusivity.