Question 6 (1 point) D An important reason why the Federal Reserve would not wan

Question

Question 6 (1 point) D An important reason why the Federal Reserve would not want to keep interest rates at 0% forever is that: al it limits the ability of the Fed to use expansionary monetary polloy when the next a) it limits the ability of the Fed to use expansionary monetary policy when the next recession occurs. Ob traises the possiblity of higher unemployment because lower interest rates slow economic growth. e) it restricts the money supply, making it harder for banks to lend money. d) it makes borrowing for homes and major purchases more expensive

Explanation / Answer

Ans. a) It limits the ability of the Fed to use expansionary monetary policy when the next recession occurs.

Why this option ? Because , Fed keeps interest rates at 0% only when there's a rescission. So if interest rates are already at 0% and a Rescission occurs in the economy , Federal Reserve would not be able to use the expansionary monetary policy as how will they reduce the interest rates from 0 . That's why Option a) is correct.

I hope you understood the answer. Do ask in case of any doubts.

A Thumsup would be highly appreciated !!

Best of Luck !! Keep Chegging !!

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.