In Early in 1994, the Federal Reserve Shifted to a Contractionary

Multiple Choice

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy
Was still in a recessionary gap left over from the 1990-1991 recession. Which of the
Following best explains this move?

A) The Fed was concerned that the budget deficit would increase.
B) The Fed had failed to take into account the lag in monetary policy.
C) The Fed was taking explicit account of the lag in monetary policy.
D) The Fed wanted to avert a potential housing market crisis.