Which of the Following Would Most Likely Result from the Fed

question 130

Multiple Choice

Which of the following would most likely result from the Fed imposing negative nominal interest rates in response to a financial crisis and recession?

• A) The negative interest rates would stimulate massive borrowing and spending, triggering rapid inflation in the short term.
• B) It would signal trouble to financial markets, causing people to deposit more money in banks to enhance feelings of financial security.
• C) Banks would freeze customer accounts so that they couldn't withdraw money, inciting financial panic.
• D) Customers would withdraw deposits, banks would have less money to lend, and the money supply and aggregate demand would both fall.

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Definitions:

Hypothalamus

A region of the brain responsible for the regulation of certain metabolic processes and other activities of the autonomic nervous system, including hunger, thirst, and body temperature.

Cingulate

A part of the brain within the cerebral cortex, involved in emotional and cognitive processing.

Brain Stem

The lower extension of the brain where it connects to the spinal cord, responsible for controlling basic life functions such as breathing and heart rate.

fMRI Research

A scientific methodology that uses Functional Magnetic Resonance Imaging to observe brain activity and understand how different areas of the brain function while performing tasks or responding to stimuli.