The Purpose of the Commitment by the Fed to Keep

question 101

Multiple Choice

The purpose of the commitment by the Fed to keep the federal funds rate at zero for a long period of time is to

• A)lower the long term interest rates.
• B)lower the short term interest rates.
• C)increase the long term interest rates.
• D)increase the short term interest rates.

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Definitions:

Diffusion of Responsibility

A phenomenon where individuals are less likely to take action or feel a sense of responsibility when others are present.

Cognitive Dissonance

is a psychological phenomenon where an individual experiences discomfort due to conflicting beliefs, behaviors, or attitudes.

De-individuation

A psychological state of decreased self-evaluation and decreased evaluation apprehension causing antinormative and disinhibited behavior.

Stimulation and Crowding

The phenomenon where high levels of stimulation (from noise, people, etc.) can either energize individuals and improve performance or lead to discomfort and decreased performance, depending on context and individual differences.