The Rapid Growth of Money Supply, M1 and M2, Between

question 51

Multiple Choice

The rapid growth of money supply, M1 and M2, between 2001 and 2006 was due, in part, to the:

• A) federal government's response to the rise in foreclosures in the United States.
• B) private banks hoarding cash because of a rise in the financial friction.
• C) Fed's response to deflationary concerns.
• D) sale of thousands of mortgages by Fannie Mae and Freddie Mac.
• E) purchases of firms of their own stock.

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Definitions:

Variable Cost

Charges that adjust according to the volume of goods produced or services provided.

Output

The total quantity of goods or services produced by a firm or industry during a specific period.

Labor

Describes the use of human physical and mental capabilities in creating products and services.

Average-Variable-Cost Curve

The average-variable-cost curve graphs the unit variable cost against the level of output, typically showing a U-shaped curve due to economies and diseconomies of scale.