The Federal Reserve (Fed) was criticized for playing a role in causing the Great Recession. Which of the following criticisms most accurately captures this criticism?
a. The Fed kept monetary policy loose for too long, thereby fueling speculation in the housing market.
b. The Fed kept monetary policy too tight immediately after the 2001 recession and then loosened it just prior to the recession, thereby precipitating the crisis.
c.The Fed relaxed banking regulations after the 2001 recession, causing banks and other financial institutions to engage in speculative activities for which they were unprepared.
d. The Fed encouraged home ownership by putting pressure on Fannie Mae and Freddie Mac.
Question 2
Which of the following will not cause the aggregate supply curve to fall?
a. Natural disasters.
b. An increase in input prices.
c. A reduction in the nation's level of productivity.
d. A decrease in the nation's average price level (i.e., the implicit price index).
e. None of these answers is correct.
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