Which of the Following Monetary Policy Tools Is More Effective

question 14

Multiple Choice

Which of the following monetary policy tools is more effective when the economy faces the interest rate zero-lower-bound problem?

• A) Open market operation
• B) Discount policy
• C) Required reserve ratio
• D) The Fed's liquidity provision

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Definitions:

Correlation Coefficient

A numerical measure that indicates the extent to which two variables fluctuate together.

Linear Relationship

A type of correlation where changes in one variable are directly proportional to changes in another variable, often displayed as a straight line in a graph.

Simple Linear Regression

Regression analysis involving one independent variable and one dependent variable in which the relationship between the variables is approximated by a straight line.

Coefficient Of Determination

A measure, usually represented as R^2, that shows the proportion of the variance in the dependent variable that is predictable from the independent variable(s).