Author Question: Fixing the insolvency problem caused by the Great Recession, the U.S. Federal Reserve as reluctant ... (Read 51 times)

brutforce · **on:** Jun 30, 2018

Fixing the insolvency problem caused by the Great Recession, the U.S. Federal Reserve as reluctant to purchase toxic assets from banks because:
a. It could cause an unwanted expansion of the e U.S. monetary base.
b. Toxic security purchases had to be funded, and the Fed already had a major debt problem.
c.It could cause an unwanted contraction of the U.S. monetary base.
d. The Fed could be accused of nationalizing the U.S. financial system.
e. All of the above.

Question 2

In explaining the downward-sloping aggregate demand curve, the wealth effect is:
a. When the price index falls, the real money supply falls, causing the real risk-free interest rate to fall, and the value of bonds (wealth) to rise.
b. When the price index falls, the real money supply falls, causing the real risk-free interest rate to rise, and the value of bonds (wealth) to rise.
c. When the price index falls, the real money supply rises, causing the real risk-free interest rate to fall, and the value of bonds (wealth) to rise.
d. When the price index falls, people become wealthy because they earn higher nominal incomes, and the price of everything they purchase is cheaper. Therefore, they are wealthier.
e. None of the above.