During 2001-2004, the Fed Injected Additional Reserves into the Banking

question 104

Multiple Choice

During 2001-2004, the Fed injected additional reserves into the banking system, which reduced the federal funds rate and other short-term interest rates. Other things constant, what is the most likely short-run impact of this policy?

• A) an increase in the rate of unemployment
• B) a reduction in the growth of employment
• C) an increase in aggregate demand and real GDP
• D) a reduction in the long-run rate of inflation

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Definitions:

Plant Equipment

Assets that are durable and used in operations to produce goods and services, typically including machinery, vehicles, and tools.

Earnings Per Share

Earnings per share (EPS) is a financial measure that divides a company's net profit by the number of its outstanding shares of common stock, indicating the company's profitability on a per-share basis.

Accruing Revenue

The process of recognizing revenue that has been earned but not yet received in cash or recorded by the company.

Selling Shares

The act of offering ownership interests in a corporation to investors in exchange for capital.