In practice,the Fed's policy of targeting money market conditions in the 1960s proved to be
A)countercyclical,helping to stabilize the economy.
B)procyclical,destabilizing the economy.
C)procyclical,helping to stabilize the economy.
D)countercyclical,destabilizing the economy.

Question

Quizplus · Accepted Answer

The Fed's policy of targeting money market conditions was procyclical, which means it tended to amplify the business cycle, rather than stabilize it. This policy involved reducing interest rates in response to economic slowdowns and increasing them when the economy was growing too quickly. This had the effect of encouraging borrowing and spending during boom times, leading to inflationary pressures, while making it more difficult for businesses and consumers to obtain credit during recessions, exacerbating the downturn.

In Practice,the Fed's Policy of Targeting Money Market Conditions in the 1960s