If the Fed Provided Additional Credit When the Economy Was

question 56

Multiple Choice

If the Fed provided additional credit when the economy was expanding and reduced credit when businesses were not expanding, the result would be:

• A) low interest rates and increased national savings.
• B) to cancel out any positive or negative effects on the overall economy.
• C) the "flooding" of money in the system, stimulating spending and job creation.
• D) the worsening of the economy, because it would choke off the supply of money when it was needed most.
• E) growth in GDP, because the Fed would be acting in unison with the general direction of the economy.

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Definitions:

Sole Proprietorships

A business owned and operated by a single individual with no distinction between the business and owner.

Tax Advantage

Financial benefits that apply to certain accounts or investments which are provided to encourage specific behaviors, such as saving for retirement. These advantages can lead to a reduction in tax liability.

Personal Liabilities

Debts or obligations that an individual is responsible for, as opposed to those belonging to businesses or governmental entities.

Limited Partners

Investors in a partnership who have limited liability to the extent of their investment in the partnership. They do not partake in the day-to-day management of the business.