(Consider This)The Fed Is Like a Sponge in That It

(Consider This) The Fed is like a sponge in that it can:

A) clean up economic problems just as one would wash dirt off a car.
B) squeeze new reserves into the banking system,or soak up reserves if the banking reserve "bowl" is too full.
C) wipe away inflation when used with the "soap" of fiscal policy.
D) wash the "windows" of the banking system so that monetary policy is more transparent.

Correct Answer:

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