The Great Moderation consensus agreement that a decrease in the interest rate was the best policy for fighting a recession was ineffective in the Great Recession because:
A) the Fed bought government securities, but interest rates did not fall.
B) interest rates were already close to zero.
C) financial institutions were engaging in maturity transformation.
D) Congress increased taxes.

Question

Quizplus · Accepted Answer

The Great Moderation consensus agreement worked well in previous recessions because interest rates had more room to decrease. However, in the Great Recession, interest rates were already close to zero, limiting the effectiveness of this policy.

The Great Moderation Consensus Agreement That a Decrease in the Interest