Question

[Related to the Chapter

Opener ]

An article in the New York Times in 2012 observed:

Older Americans and other savers are just unintended casualties of policies aimed at other economic targets, particularly the policy making it easier for consumers and companies to borrow.

Source: Catherine Rampell, "As Low Rates Depress Savers, Governments Reap Benefits," New York

Times ,

September 10, 2012.

Which of the following is a policy that has made it easier for consumers and companies to borrow?

A.Regulators have been inspecting banking institutions more carefully.

B.The U.S. government has been running massive deficits.

C.The Fed has been keeping the target Federal Funds rate near zero.

D.The Treasury has been issuing more government bonds.

These policies have made casualties of older Americans and other savers by

A.maintaining low-interest rates because older American have found it more costly to borrow funds.

B.maintaining high government borrowing because savers have been crowded out of the financial markets.

C.maintaining low-interest rates because savers cannot grow their investment portfolios.

D.All of the above.

Answer 1

C, is the correct option because in all other options policies are aimed at lowering the borrowing by companies and consumers . For example tight regulation will make borrowing difficult as more scrutiny will take place. Similarly large deficit means government is borrowing heavily giving less resources for companies and consumers.

A because to revive economy out of recession there are monetary injection . These monetary injections will increase supply . With incresed supply people will rush to buy bonds . This will lower the rate of intrest hurting savers.