Ben Bernanke and Alan Blinder were able to document that
A)peaks in the rate of growth of the money supply actually follow, rather than precede, peaks in the business cycle.
B)increases in the federal funds rate cause output to fall.
C)increases in the federal funds rate cause increases in the inflation rate.
D)output declines almost immediately in response to a contractionary policy by the Fed.

Question

Quizplus · Accepted Answer

Increases in the federal funds rate, which is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight, typically lead to a tightening of monetary policy. This can cause output to fall as borrowing becomes more expensive, reducing spending and investment by businesses and consumers.

Ben Bernanke and Alan Blinder Were Able to Document That