In the event that nominal short-term interest rates cannot be lowered further,the Federal Reserve might rely on ________.
A)federal government fiscal policy
B)targeting the fed funds rate
C)quantitative easing
D)targeting the inflation rate

Question

Quizplus · Accepted Answer

In the event that nominal short-term interest rates cannot be lowered further, the Federal Reserve might rely on quantitative easing, which involves purchasing long-term securities to decrease long-term interest rates and stimulate lending and investment. This has been a policy tool used by the Federal Reserve in recent years to aid economic recovery. The other options listed are not effective ways for the Federal Reserve to stimulate the economy when interest rates are already at their lowest point. Fiscal policy relies on government spending and taxation, targeting the fed funds rate has already been exhausted, and targeting the inflation rate is a goal rather than a tool for stimulating the economy.

In the Event That Nominal Short-Term Interest Rates Cannot Be