Answered: Refer to the Article Summary.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Article Summary In a September 2019 tweet, President Trump said that Fed officials should cut interest rates to zero or below, adopting a policy that has been used in Europe and Japan. Negative interest rates would result in commercial banks paying the Fed interest for funds kept at the central bank instead of banks receiving interest on their reserves. If negative rates become a reality in the United States, consumers may end up having new fees to pay on their bank accounts and investors could be faced with negative yields on government bonds. President Trump has pushed for zero or negative interest rates to spur the economy and to combat the strengthening dollar in European markets, where negative rates have weakened the euro and made U.S. exports less competitive. Critics of possible negative interest rates have pointed to the mixed results in Europe, with some reports stating that lending has increased because of the rates, and other reports stating the opposite. Some critics have also pointed to the important role of money market mutual funds in the U.S. financial market, and that these funds' business models would suffer in an environment with negative interest rates, which could ultimately destabilize the economy. Source: Jeanna Smialek, "Trump Wants Negative Rates. Here's How That Would Work," New York Times, September 11, 2019

Refer to the Article Summary. Implementing a negative
interest rate policy, as is discussed in the article summary,
would be an example of.
monetary policy designed
to
aggregate demand.
A expansionary; increase
B expansionary; decrease
C contractionary; increase
D
contractionary; decrease

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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