When the Credit Spread Rises,an Effective Policy Response Might Be

question 57

Multiple Choice

When the credit spread rises,an effective policy response might be to ________.

• A)lower the real interest rate on safe assets
• B)prevent the real federal funds rate from falling below zero
• C)pursue nonconventional monetary policies to restore the functioning of financial markets
• D)announce swift and stern action against those responsible for the financial disruption

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Definitions:

Safety Margin

The difference between the actual sales and the break-even point; it measures the amount by which sales can drop before a business incurs a loss.

Automated Firm

An enterprise that employs advanced technologies and systems such as artificial intelligence, robotics, and sophisticated software to minimize human intervention in its operations.

Break-Even Sales Volume

The quantity of products sold or services provided at which total revenues equal total costs, resulting in no profit or loss.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and contribute to profit.