In September 2012 the Fed Announced That Because of Weak

question 25

Multiple Choice

In September 2012 the Fed announced that because of weak labor market conditions, it would ________ $40 billion of mortgage backed securities per month. Critics of the action said that banks have ________ excessive reserves so the action would be futile.

• A) sell; huge amounts of
• B) buy; huge amounts of
• C) buy; very little
• D) sell; very little

Discuss the effectiveness and obstacles of using monetary and fiscal policy to address inflation and recession.

Recognize the potential effects of far-sighted consumer behavior on policy effectiveness.

Understand the concept of political business cycles and the role of monetary policy within these cycles.

Describe the benefits and costs associated with low levels of inflation and the rationale behind targeting zero inflation.

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Definitions:

Low Concentration

A condition characterized by a reduced amount of a substance in a given area or volume.

Neuron

A specialized cell transmitting nerve impulses; a nerve cell.

Potassium

An essential dietary mineral and electrolyte involved in nerve function, muscle contraction, and maintaining fluid and electrolyte balance in the body.

Sodium

A chemical element, symbol Na, essential for various bodily functions, including maintaining fluid balance and conducting nerve impulses.