Question

TOPIC: Achieving monetary policy goals and the Great Recession of 2007-2009. A) What are the Federal Reserve's established economic goals? B) What are the policy tools that the Fed directly controls? What are the policy instruments and intermediate targets? C) What were the contributing factors to the Great Recession of 2007-2009? D) What were the unconventional monetary measures that the Fed used to combat the recession? E) How did international policy coordination help keep the Great Recession from becoming an economic depression?

Answer 1

A is the correct option. When government lowers the taxes on household, then household will spend more meaning consumption expenditure will increase which is a component of aggregate demand so aggregate demand will increase and will shift rightwards.

D is the correct option. Unemployment would decrease and inflation would increase.

Increase in aggregate demand shifts AD to the right and since there is no change in aggregate supply price increases and output increases.

B is the correct option. Changes in government spending and taxation to achieve economic objectives. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

B is the correct option. Maintain high employment stable prices and economic growth. Countercyclic policy is the government policy aimed at reducing or neutralizing anti-social effects of economic cycles.