(Consider This)The Fed Is Like a Sponge in That It

question 49

Multiple Choice

(Consider This) The Fed is like a sponge in that it can:

• A) clean up economic problems just as one would wash dirt off a car.
• B) squeeze new reserves into the banking system,or soak up reserves if the banking reserve "bowl" is too full.
• C) wipe away inflation when used with the "soap" of fiscal policy.
• D) wash the "windows" of the banking system so that monetary policy is more transparent.

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Definitions:

Shocked

A sudden, intense surprise or disturbance of the mind or emotions, often caused by an unexpected event.

False Consensus

The tendency to overestimate how much others share our beliefs and behaviors.

News Media

Organizations and outlets that gather, report, and disseminate news, information, and commentary to the public.

Cognitive Salient

The aspect of being noticeable or prominent in the mind, especially when referring to specific thoughts or stimuli.