Two actions by the Fed during Alan Greenspan's term as chairman have been identified as possibly contributing to the financial crisis in 2008. Which of the following was one of those actions?
A) working in concert with the European Central Bank to stabilize the dollar / euro exchange rate
B) financing the first Gulf War by printing money and generating rapid inflation
C) decreasing the money supply to fight the possibility of disinflation
D) the decision to keep the federal funds rate at 1 percent from June 2003 to June 2004
Question 2
How does an increase in the relative price of a country's goods in terms of foreign goods, or real exchange rate, affect its balance of trade?
A) An increase in the real exchange rate reduces imports, raises exports, and increases the balance of trade.
B) An increase in the real exchange rate raises imports, reduces exports, and reduces the balance of trade.
C) An increase in the real exchange rate reduces imports, raises exports, and reduces the balance of trade.
D) An increase in the real exchange rate raises imports, reduces exports, and increases the balance of trade.
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