In Response to a Severe Recession, the Fed More Than

question 132

Multiple Choice

In response to a severe recession, the Fed more than doubled the monetary base and pushed short-term interest rates to near zero during 2009-2010.  What happened in 2011?

• A) The inflation rate soared to double-digit levels.
• B) Aggregate demand increased and the economy recovered rapidly.
• C) The large budget deficit of the earlier years was transformed into a budget surplus.
• D) The high rate of unemployment continued.

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Definitions:

Economic Development

The process through which a nation improves the economic, political, and social well-being of its people.

Saving and Investment

The act of setting aside income for future use and the use of those savings for purchasing capital goods or financial assets.

Productivity of Labor

The measure of output per worker or per hour worked, indicating how effectively labor inputs are converted into goods or services.