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output below potential reduces inflation, while output above potential increases inflation.
While Lucent, a leading telecommunications equipment maker that was once a star spinoff from AT&T, has had its share of reversals, it retains an investment- grade credit rating. But bankers have become especially reluctant to lend money to highly leveraged or struggling companies. Banks have also been forced to set more money aside to cover loan losses in recent months, and some are balking at financings that might risk future losses. Wachovia is reluctant to continue lending to Lucent, according to other banks involved in the deal.
The bankers say their caution is appropriate. "We see continued signs of weakness in elements of the economy and the way large companies are performing," said John McLean Jr., head of corporate banking and capital markets at Wachovia. "If it's raining and it starts coming down in torrents, you drive slower.""
Which money market diagram best represents the changes in lending by banks in 2001?
Here are some excerpts from “US Economy Slowed Last Quarter, but Signs Are Pointing Up,” New York Times, January 30, 2015. Read the article and answer the question.
The U.S. economy slowed in the final three months of 2014, but a burst in consumer spending and the prospect of continued low energy prices are bolstering confidence that growth will strengthen this year.
The economy, as measured by the gross domestic product, grew at a 2.6 percent annual rate in the October-December period, the government said Friday. That was down from a sizzling 5 percent gain in the previous quarter
But business investment in equipment shrank after big increases in the previous two quarters. Economists partly blamed the weakness on cutbacks in oil and gas drilling by energy companies grappling with the plunge in energy prices.
Government spending fell after a gain in the third quarter. The third quarter had been bolstered by a 16 percent rise in defense spending, which backpedaled last quarter.
Trade reduced growth by a full percentage point in the fourth quarter. Even with the fourth quarter slowdown, the U.S. economy is still the star of the global economy. Europe is battling renewed weakness, Japan is in a recession, and even growth in China slowing.
Consumers stepped up their spending at the fastest rate in nearly nine years. Thanks to steady job growth, tumbling oil prices and signs that pay may finally be picking up, Americans appear poised to keep the economy expanding at a solid pace. On Friday, the University of Michigan reported that its index of sentiment showed that U.S. consumers are more confident than they have been since January 2004.
Economists are optimistic about output growth in 2015 because (what happens to pay, and prices)
Here are some excerpts from the article “Low Inflation Seen Amid Solid Growth In Economy,” New York Times, August 29, 1997. Read these excerpts and answer the question.
The economy grew at a 3.6 percent annual pace during the spring, far higher than the 2.2 percent rate estimated a month ago, the Government said today. Even with the more robust growth, inflation remained subdued during the second quarter.
Indeed, today's report, economist Paul W. Boltz said, ''explains how the unemployment rate was able to drop as much as it did,'' to 4.9 percent for the April-June period from 5.3 percent in the first quarter.
The economy ''is just whirling along,'' said M. Kathryn Eickhoff, a New York consultant, ''way over the speed limit.''
Federal Reserve policy makers next meet on Sept. 30.
''I think they're going to be concerned,'' Ms. Eickhoff added, about an economy growing perhaps twice as fast as growth in the labor force and productivity allow even if inflation, a lagging indicator, remains tame.
Which money market diagram best represents the Federal Reserve policy that economists were expecting in 1997?
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