3. Which of the following describes the law of diminishing marginal control? a.)

Question

3. Which of the following describes the law of diminishing marginal control?

a.) The Federal Reserve Bank cannot impact excess reserves and the money supply.

b.) Financial institutions have few ways to assess the solvency of borrowers.

c.) After regulations are enacted, institutions find ways around the regulations.

d.) As people engage in leverage, they have less and less control over the price of the asset.

4. Which of the following is not one of the unconventional monetary policy tools used by the Fed?

a.) Precommitment strategy

b.) Credit easing

c.) Operation twist

d.) Dodd-Frank Act

5.) Negative interest rates:

a.) can only exist if there is inflation

b.) are impossible

c.) mean that lenders pay borrowers for making a loan

d.)mean that borrowers pay lenders for making a loan

Explanation / Answer

4) a ) Precommitment strategy is not an unconventional monetary policy tool used by the Fed. It is a strategy used by parties to the conflict and strengthens its position and make threats.

5) Negative interest rates c) mean that lender pays borrowers for making a loan. The lender pays the individual to borrow money from them and borrowers get paid. This leads to borrowing and lending and also the savers are penalized. Consumers spend more and business make investments due to this strategy.

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