One Problem with the Ripple Effect from the Fed's Monetary

question 45

Multiple Choice

One problem with the ripple effect from the Fed's monetary policy is

• A) the fact that the monetary policy transmission process is long and drawn out.
• B) that changing the Federal funds target rate seldom has an effect on the markets for reserves and loanable funds.
• C) that the Fed's policy sometimes has a large impact on potential GDP as well as its usual impact on aggregate demand.
• D) the tight relationship between that the Federal funds rate has to aggregate spending.
• E) the frequent misalignment of the spread between the Federal funds rate and the Federal funds rate target.

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Definitions:

Credit Sales

Sales in which the payment is deferred to a future date, typically allowing the buyer to receive goods or services immediately but pay later.

Promissory Note

A financial instrument involving a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Maker

An individual or entity that creates or issues a financial instrument, such as a check or note, thereby promising to pay the amount stated.

Direct Write-Off Method

An accounting method where uncollectible receivables are directly written off against income at the time they are deemed unrecoverable.