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 central bank 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) the federal government increased taxes.

Question

Quizplus · Accepted Answer

The Great Moderation consensus was based on the assumption that the central bank could use interest rate adjustments to control the economy. However, during the Great Recession, interest rates were already at or near zero, which limited the effectiveness of this policy. Other unconventional monetary policies, such as quantitative easing, had to be implemented to stimulate the economy.

The Great Moderation Consensus Agreement That a Decrease in the Interest