Which of the Following Prevented the Fed from Reducing Long-Term

question 56

Multiple Choice

Which of the following prevented the Fed from reducing long-term real interest rates during the financial crisis of 2007-2009?

• A) an increase in expected inflation
• B) an increase in the risk premium
• C) the collapse in the housing market
• D) the failure of the federal funds rate to respond to monetary policy

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Definitions:

Real Income

Income adjusted for price changes.

Nominal Wages

Wages that are paid to employees in current monetary terms, without adjustment for inflation.

Economic Goal

An objective or desired outcome that societies or governments aim to achieve through economic policies and strategies, such as growth, stability, and equity.

Collective Bargaining

Collective bargaining is the process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights.