Since the Fed faces uncertainty regarding effects of its policies, the Fed usually proceeds:
A)forcefully to ensure a desired effect.
B)only after fiscal policy polices have been enacted.
C)cautiously with only small changes in the interest rate.
D)only after a recession is statistically proven to exist.

Question

Quizplus · Accepted Answer

Because of uncertainties regarding the effect of a given change in the real interest rate on spending the Fed tends to proceed cautiously. To avoid large changes in interest rates, the federal funds rate is rarely changed more than one-half of a percentage point (from 5.50 percent to 5.00 percent, for example)at any one time.

Since the Fed Faces Uncertainty Regarding Effects of Its Policies