In which of the following situations would the Fed conduct contractionary monetary policy?
A) The Fed is worried that deflation will become a problem.
B) The Fed fears that unemployment is climbing above the natural rate.
C) The Fed believes that aggregate demand was growing too slowly to keep up with potential GDP.
D) The Fed is concerned that aggregate demand would continue to exceed the growth in potential GDP.
Question 2
A bank's largest liability is its
A) shareholder equity. B) long-term debt.
C) short-term borrowing. D) deposits of its customers.
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