"As the Fed Chases Inflation, Critics Shout, 'Faster!'" "For Weeks

question 223

Multiple Choice

"As the Fed Chases Inflation, Critics Shout, 'Faster!'" "For weeks, the Fed has broadcast its intention to raise interest rates glacially." The Fed was moving slowly, according to an economist because "...the declining price of oil, economic fundamentals, including productivity and global competition, will keep inflation in check." The Fed, recognizing that the economy was improving stated it planned to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." Other economists disagree with the Fed's restrained policy as a "mistake."
Www) nytimes, 7/1/2004
The Fed's policy will ________ the quantity of money and ________ the supply of loanable funds.

• A) decrease; decrease
• B) increase; decrease
• C) decrease; increase
• D) increase; increase

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Definitions:

Flotation Costs

The financial outlay a firm encounters when releasing new securities, involving charges for legal matters, underwriting, and registering the issuance.

Issuance

The act of making something available or distributing it officially, commonly used in the context of financial securities being issued to the public.

New Securities

Financial instruments recently issued by a corporation or government entity to raise funds from investors.

Cost of Equity

The theoretical payment a company offers to its shareholders as compensation for the risk they assume by investing their funds.