The Fed
A)always engages in countercyclical policy.
B)always intends to engage in procyclical policy.
C)can engage in procyclical policy if it mistimes its policy response.
D)never intends to engage in countercyclical policy.

Question

Quizplus · Accepted Answer

The Fed's goal is to achieve macroeconomic stability and therefore engage in countercyclical policy. However, if the Fed mistimes its policy response, it can end up unintentionally engaging in procyclical policy. Therefore, choice C is the best answer.