Answer: Say the Federal Reserve decides to reduce interest rates to stimulate economic growth. They do this by purchasing government securities over the open market with newly created money. The bank will take this new money and lend it out (or purchase securities, it doesn't matter due to arbitrage). This has the effect of increasing the supply of loanable funds, pushing down the interest rate.
Now just because the interest rate is lowered does not mean that the expansionary monetary policy will have its desired effect immediately. Lower interest rates encourage borrowing, and increased borrowing can increase employment, GDP, etc. There is a lag between the reduction in interest rates and its effects on the real economy. People will not respond to the lower interest rates by borrowing and hiring immediately; the effect can take 1-2 years.
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I dont understand that question
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It was a big deal because it could have caused people to look at the government in a way that they would not approve of.
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The answer is behaviourist.
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The behaviourist aproach to psychology seeks to understand the motivation behind human and animal behaviour. The example describes that people will change their behaviour when there is an external motivation (probably a reward). This can be explained through an important branch of behaviourism called <u>operant conditioning</u><u>,</u> which states that individuals are more likely to repeat an action when it is reinforced, positively or negatively.
