In addition to keeping interest rates too low for too long, the Fed also:
A. overestimated the importance of the housing sector for the whole economy.
B. kept government spending too high for too long in the years leading up to the recession.
C. ran too great of a budget surplus in the years leading up to the recession.
D. underestimated the impact of a decline in the housing sector on the whole economy.
Answer: D. underestimated the impact of a decline in the housing sector on the whole economy.
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Macroeconomic equilibrium occurs when
A) there is no inflation. B) real GDP is equal to potential GDP. C) the aggregate quantity demanded is equal to the aggregate quantity supplied. D) the economy is fully employed. E) the price level equals the potential price level.
Currency in circulation is currency that meets all of the following criteria except for currency
A) outside the Treasury. B) outside the Federal Reserve. C) held as vault cash in banks. D) held by the non-bank public.