What Is a Reason It Might Be Hard for the Fed

question 199

Multiple Choice

What is a reason it might be hard for the Fed to restore aggregate demand in the face of a negative demand shock?

• A) The Fed might run out of money.
• B) Banks usually don't do what the Fed demands of them.
• C) The Fed must operate in real time,when a lot of the data about the state of the economy are unknown.
• D) The economy responds to the Fed's actions with no lag.

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Definitions:

Experimental Study

A research method involving the manipulation of variables to establish cause and effect relationships.

Correlational Research

A type of study that examines the relationship between two or more variables to determine if a statistically significant association exists.

Cause And Effect

The principle or concept that an action or event will produce a certain response or outcome in the form of another event.

Generalizability

The extent to which findings or conclusions from a specific study can be applied to broader contexts or different groups.