If the Fed Decides to Keep Interest Rates Low When

question 123

Multiple Choice

If the Fed decides to keep interest rates low when there is a large budget deficit, economists conclude that the Fed is

• A)monetizing the debt.
• B)neutralizing the effects of the deficit.
• C)correcting the deficit for inflation.
• D)resisting the effects of the deficit.

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Definitions:

Nonconforming Mortgage Loans

Mortgage loans that do not meet standard bank criteria, often used for borrowers with poor credit histories or for properties that are unique.

Subprime Loans

Loans offered to individuals with a poor credit history or a higher risk of defaulting compared to prime borrowers.

Default Risk

The risk that a borrower will not repay a loan according to the agreed terms, leading to potential losses for the lender.

Glass-Steagall Act

An act of Congress in 1933 that separated investment banking from retail banking to reduce financial speculative bubbles and prevent bank failures.