Author Question: Assume that the Fed knows a demand shock has occurred in the economy. It takes the Fed 2 months to ... (Read 14 times)

mmm · **on:** Jun 30, 2018

Assume that the Fed knows a demand shock has occurred in the economy. It takes the Fed 2 months to adjust policy to the shock, and it takes the economy 14 months for the policy change to affect the economy.

The 2 month time period refers to the ________, and the following 14 month time period refers to the ________. A) policy lag; implementation lag
B) recognition lag; implementation lag
C) implementation lag; impact lag
D) policy lag; recognition lag

Question 2

Finance companies ________.

A) acquire access to funds by accepting deposits then using these monies to lend to households and firms
B) raise funds by selling commercial paper then lend these funds to consumers
C) acquire access to monies through the payment of premiums by employees
D) are a special type of mutual fund