Question: Consider the following economic events. Which of them will have the effect of amplifying a negative real shock and which are intended to offset a shock?
a. Several large financial institutions become insolvent as a housing bubble bursts and subprime mortgages begin to default in large numbers.
b. Many financial institutions begin issuing fewer loans and increasing their excess reserve holdings in anticipation of higher default rates on existing loans.
c. The Federal Reserve expands the money supply and lowers interest rates.
d. Instead of building for future demand, home builders delay their usual building so they can wait and see whether demand increases.
e. As unemployment rises, consumers begin cutting back on their expenditures and paying down personal debt.
f. The government passes a stimulus package increasing spending on roads and other infrastructure.
g. Firms accumulate cash reserves and delay expansion projects pending the outcome of potential government actions influencing business conditions.
h. Students decide to stay in college for longer periods of time due to the poor job market, and older workers retire early.