The Federal Reserve's policy to "lean against the wind" means
A. when output and/or the price level are low, the Fed sets a low interest rate to stimulate the economy.
B. that the Federal Reserve chairman will oppose Congress' pressure to raise interest rates.
C. when output and/or the price level are high, the Fed sets a high interest rate to rein the economy in.
D. that the Fed will lower the interest rate to rein in the economy.
Answer: C
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Activists-believe that AD is unstable because
A) business and consumer attitudes and expectations shift. B) monetary policy is variable. C) fiscal policy effects are unpredictable. D) Both B and C are correct.
If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then
a. U.S. net capital outflow rises which increases the U.S. exchange rate. b. U.S. net capital outflow rises which decreases the U.S. exchange rate. c. U.S. net capital outflow falls which increases the U.S. exchange rate. d. U.S. net capital outflow falls which decreases the U.S. exchange rate.