Author Question: In the absence of financial frictions, ________. A) interest rates for different borrowers move ... (Read 33 times)

viki · **on:** Jun 30, 2018

In the absence of financial frictions, ________.

A) interest rates for different borrowers move closely together
B) all loans in the economy are transacted at a common interest rate
C) the level of output is not affected by changes in the real interest rate
D) an increase in inflation leads to a decrease in the real interest rate

Question 2

Compared to the past, FOMC meetings are now much more transparent. How might this transparency impact the effectiveness of monetary policy actions?

A) The transparency helps make the Fed's actions more credible and should help make policy actions more effective.
B) The transparency undermines the effectiveness since financial markets can more quickly adjust their behavior to fight the policy actions.
C) The transparency counteracts the secrecy in which fiscal policy is enacted, and therefore decreases its effectiveness.
D) The transparency lengthens policy lags, so monetary policy takes longer to implement and take effect.