15. In the short run the a. b. C. set by the central bank can affect investment because Nominal exchange rate; Money supply is constant Inflation rate; The real interest rate is constant Price level; Money supply is constant d. Nominal interest rate; Inflation is sticky e. Money growth rate; Prices are flexible

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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15. In the short run the _______ set by the central bank can affect investment because _______

a. Nominal exchange rate; Money supply is constant  
b. Inflation rate; The real interest rate is constant  
c. Price level; Money supply is constant  
d. Nominal interest rate; Inflation is sticky  
e. Money growth rate; Prices are flexible
Transcribed Image Text:15. In the short run the _______ set by the central bank can affect investment because _______ a. Nominal exchange rate; Money supply is constant b. Inflation rate; The real interest rate is constant c. Price level; Money supply is constant d. Nominal interest rate; Inflation is sticky e. Money growth rate; Prices are flexible
**Question 24: Understanding the Federal Funds Rate Post-2008-2009**

The figure below plots the Federal Funds rate following the 2008-2009 Great Recession. According to Keynesian terminology, the economy fell into a “_____ trap” which made monetary policy ______. Choose the correct pair of terms to complete the sentence.

a. Liquidity; Ineffective  
b. Monetary; Effective  
c. Unemployment; Ineffective  
d. Illiquidity; Effective  
e. Deflation; Ineffective  

**Graph Explanation:**

The graph titled "Effective Federal Funds Rate" illustrates the trend of this rate from January 2008 to January 2013. The rate is measured in percent and is plotted over time.

- **Initial Decline (2008-2009):** At the beginning of the period, in January 2008, the rate starts above 4%. By the end of 2008, it dramatically declines to near 0.1%.
  
- **Stability (2009-2013):** From January 2009 to January 2013, the rate remains consistently low, close to 0%. 

This pattern highlights the Federal Reserve's response to the economic downturn, characterized by reduced interest rates to stimulate the economy.
Transcribed Image Text:**Question 24: Understanding the Federal Funds Rate Post-2008-2009** The figure below plots the Federal Funds rate following the 2008-2009 Great Recession. According to Keynesian terminology, the economy fell into a “_____ trap” which made monetary policy ______. Choose the correct pair of terms to complete the sentence. a. Liquidity; Ineffective b. Monetary; Effective c. Unemployment; Ineffective d. Illiquidity; Effective e. Deflation; Ineffective **Graph Explanation:** The graph titled "Effective Federal Funds Rate" illustrates the trend of this rate from January 2008 to January 2013. The rate is measured in percent and is plotted over time. - **Initial Decline (2008-2009):** At the beginning of the period, in January 2008, the rate starts above 4%. By the end of 2008, it dramatically declines to near 0.1%. - **Stability (2009-2013):** From January 2009 to January 2013, the rate remains consistently low, close to 0%. This pattern highlights the Federal Reserve's response to the economic downturn, characterized by reduced interest rates to stimulate the economy.
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