Monetary Policy Is Often Ineffective in a Banking Crisis Because

question 125

Multiple Choice

Monetary policy is often ineffective in a banking crisis because businesses and consumers:

• A)respond to low interest rates by borrowing and spending so much that inflation results.
• B)borrow large amounts because interest rates are so low, but they are unwilling to spend the money that they have borrowed.
• C)aren't willing to borrow and spend even though interest rates are very low.
• D)aren't willing to borrow and spend because interest rates are so high.

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Definitions:

Imports

refer to goods or services purchased from other countries, which are brought into a country to meet domestic demand or for further processing.

Exports

Goods or services produced in one country and sold to buyers in another, contributing to a nation's gross domestic product.

United States

A country in North America comprising 50 states and a federal district, known for its significant global economic and political influence.

Bretton Woods System

A monetary order negotiated in 1944 which established a system of fixed exchange rates, leading to the creation of the International Monetary Fund (IMF) and the World Bank.