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As part of its response to the COVID-19 impact on the US economy, the Federal Reserve sharply decreased the federal funds rate in March from
- As part of its response to the COVID-19 impact on the US economy, the Federal Reserve sharply decreased the federal funds rate in March from 1.75% to 0.25%.
- What stage of the business cycle recession or expansion is expected to follow from the COVID-19 crisis? What changes to employment and inflation will be worrisome to the Federal Reserve?
- List the steps in the monetary policy transmission mechanism that are expected to follow from the lower federal funds rate.
- Do you think that aggregate demand would be sensitive to changes in interest rates during a major pandemic? Why or why not? Will the policy from part b be more or less effective as a result?
- Do you think that the average marginal propensity to consume is high or low during a major pandemic? Why or why not? Will the policy from part a be more or less effective as a result?
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Managing Finance A Socially Responsible Approach
Authors: D. Crowther
1st Edition
0750661011, 978-0750661010
