In the IS-MP Framework,when the Fed __________ the Federal Funds

question 71

Multiple Choice

In the IS-MP framework,when the Fed __________ the federal funds rate in the aftermath of the decline in housing prices,the risk premium gave rise to a(n) __________ in the real interest rate which caused a(n) __________.

• A)lowered;increase;deeper recession
• B)raised;decline;commodity bubble
• C)lowered;decline;expansion
• D)held constant;economic "settling"
• E)lowered;decrease;deeper recession

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Definitions:

Annuities

Financial products sold by financial institutions that are designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time.

Present Value

The current financial value of money to be obtained in the future or upcoming cash flow payments, quantified by a particular rate of return.

Cash Flows

The total amount of money being transferred in and out of a business, especially as affecting liquidity.

Investment

The expenditure of money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property.