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The real balances effect occurs because a higher price level will reduce the real value of people's
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- When the Federal Reserve conducts open-market operations to increase the money supply, it1)redeems Federal Reserve notes.2)buys government bonds from the public.3)decreases its lending to member banks.4)raises the discount rate.
- Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit. What would happen to the interest rate? a. It would decrease. b. It would increase. c. It would stay the same. d. It might do any of the above.
- Robert Samuelson, a columnist for the Washington Post argues that the Great Moderation actually caused the Great Recession. During the Great Moderation, "consumers could assume more debt—and lenders could lend more freely."Source: Robert J. Samuelson, "Is the Economy Experiencing another Great Moderation?" Washington Post, June 4, 2014.These actions might have made the severe recession of 2007-2009 more likely becauseA.regulators could not determine who owned the loans and who should be paid.B.once incomes began to fall, people could not pay their debt, and banks suffered losses as repayments fell.C.bankers continued to lend, even though they had losses, and many banks collapsed.D.consumers continued to spend, propping up the economy, even though their debt expanded.