The Appropriate Monetary Policy in the Event of a Recessionary

question 203

Multiple Choice

The appropriate monetary policy in the event of a recessionary gap would be to

• A) increase the difference between the discount rate and the federal funds rate.
• B) engage in an open market purchase of U.S. government securities.
• C) increase the difference between the federal funds rate and the required reserve ratio.
• D) raise the required reserve ratio.

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Definitions:

Automatic System

This term relates to cognitive processing that functions effortlessly, quickly, and without the need for conscious guidance, as opposed to the deliberate system.

Gut Reactor

An individual who often relies on intuitive, emotional responses rather than analytical thinking when making decisions.

Deliberate System

A cognitive processing system that is slow, analytical, and consciously controlled, often involved in reasoned decision-making.

Social Brain Theory

The hypothesis that the complex social structures of humans have significantly influenced the evolution of the human brain and cognition.