If the Fed's Monetary Policy Reaction Function Does Not Change

question 154

Multiple Choice

If the Fed's monetary policy reaction function does not change, then when inflation decreases the Fed responds by ________ the real interest rate, which ________ consumption and investment spending, which ________ output.

• A)decreasing; increases; increases
• B)increasing; increases; decreases
• C)increasing; decreases; decreases
• D)decreasing; decreases; decreases

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Definitions:

Margin Call

A requirement from a broker for an investor to provide additional funds or assets to mitigate potential losses.

Maintenance Margin

The minimum amount of equity that must be maintained in a margin account to avoid a margin call.

Margin Deposit

The initial amount of money placed in a margin account, used as collateral for borrowing money to buy securities on margin.

Single Stock Futures

Futures contracts where the underlying asset is an individual stock, allowing speculation or hedging on the future price of the stock.