TARGETING INTEREST RATES CAN BE PROCYCLICAL BECAUSE (A) A DECREASE...

79) Targeting interest rates can be procyclical because (a) a decrease in income decreases interest rates, causing the Fed to sell bonds, decreasing the monetary base and money supply, leading to further decreases in income. (b) a decrease in interest rates decreases income, causing the Fed to sell bonds, decreasing the (c) a decrease in the monetary base decreases the money supply, causing the Fed to sell bonds, decreasing the monetary base and money supply, leading to further decreases in income. (d) a decrease in income decreases the monetary base and money supply, causing the Fed to sell bonds to decrease interest rates and income. (e) none of the above. Answer: A Question Status: New