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Which is true of monetary policy? a) Volcker’s “Saturday Night Special” was an example of Federal...

Which is true of monetary policy? a) Volcker’s “Saturday Night Special” was an example of Federal Reserve tightening in the credit markets. b) Yield curve inversions are often associated with Federal Reserve tightening cycles. c) Quantitative Easing was utilized to relieve stress in certain financial markets in the aftermath of the financial crisis. d) All of the above.

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Expert Solution

Answer: d;

All are correct.

Option a: this is the increase of Fed Funds rate (the rate at which one bank gives loan to other bank) from 11% to 12% on 6th October, 1979, Saturday. Such monetary policy was taken by the Chairman.

Option b: such inversion happens when short-run interest rates are higher than long-run interest rates. This thing happens at the time of recession in the business cycle.

Option c: this is expansionary monetary policy for increasing money supply in the economy.

Rahul Sunny answered 2 years ago
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