According to real business cycle theorists, the tendency of money ...

[Jramos095]

According to real business cycle theorists, the tendency of money to lead output may be due to
 
  A) government spending shocks, which lead to later changes in economic activity, and the tendency for bank loans to expand in advance of real activity that will occur at a later date.
  B) the tendency for bank loans to expand in advance of real activity that will occur at a later date and the Federal Reserve's use of all available information in trying to stabilize the price level.
  C) the Federal Reserve's use of all available information in trying to stabilize the price level and the Federal Reserve's use of all available information in trying to stabilize the level of economic activity.
  D) the Federal Reserve's use of all available information in trying to stabilize the level of economic activity and government spending shocks, which lead to later changes in economic activity.

Question 2

List and briefly explain the primary goals of the Fed.
 
  What will be an ideal response?

[mrphibs]

Answer to Question 1

B

Answer to Question 2

1. Price stability. The Fed's goal of price stability means that it attempts to achieve low and steady inflation. Although the Fed has never formally announced a target for the inflation rate, many economists believe that the Fed considers an inflation rate of roughly 2 to be consistent with price stability.
2. High employment. The Fed attempts to keep cyclical unemployment as close to zero as possible to be compatible with its goal of price stability.
3. Financial market stability. Financial market stability makes possible the efficient matching of savers and borrowers and promotes the efficient use of resources.
4. Interest rate stability. Stabilizing interest rates makes it easier for firms to plan investments in plant and equipment and for households to have confidence in long-term investments in houses, and it can help to stabilize the financial system.