What actions should the Fed take if it believes the economy is about to fall into recession?
What will be an ideal response?
If the Fed believes the economy is about to fall into recession, it should conduct expansionary monetary policy, increasing the money supply and reducing interest rates. In implementing expansionary monetary policy, the Fed could lower the discount rate, lower the reserve requirement, and/or have the trading desk purchase U.S. Treasury securities.
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Rational people make decisions at the margin by
a. following marginal traditions. b. behaving in a random fashion. c. thinking in black-and-white terms. d. comparing marginal costs and marginal benefits.
When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?
a. the real value of wealth b. the interest rate c. the value of currency in the market for foreign exchange d. All of the above are correct.