Forward Commitment by the Fed Has Which of the Following

question 147

Multiple Choice

Forward commitment by the Fed has which of the following impacts?

• A) Forward commitment encourages lending because banks do not fear that the Fed will suddenly reverse the policy.
• B) Forward commitment encourages excessive lending as banks try to take control of as many reserves as possible before the policy is exhausted.
• C) Forward commitment eliminates all flexibility in monetary policy.
• D) Forward commitment creates moral hazard in lending,as banks know that the Fed will continue to pump reserves into the system.

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Definitions:

Leadership Approach

The style or method employed by a leader in guiding, directing, and influencing the work and behavior of others.

Ethical

Pertaining to or concerned with morals, the principles of right and wrong behavior, and the goodness or badness of human character.

Fear of Being Caught

The anxiety or concern about the potential discovery of one's wrongful actions or mistakes.

Emotional Intelligence

The capability to recognize, understand, manage, and reason with emotions in oneself and others, enhancing interpersonal communication and emotional awareness.