According to the New Keynesian Approach Output Fell During the Early

question 4

Multiple Choice

According to the new Keynesian approach output fell during the early 1990s because

• A)fiscal policy was sufficiently contractionary to offset an expansionary monetary policy.
• B)the rightward shift of the AD curve was greater than the leftward shift of SRAS curve.
• C)consumers and businesses came to expect higher inflation, thereby causing the SRAS curve to shift to the left.
• D)the Fed decided to initiate a contractionary monetary policy to fight inflation.

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Definitions:

Temporal Method

An exchange rate conversion technique where monetary assets and liabilities are converted at historical rates, while non-monetary assets and liabilities are converted at the current rate.

Historical Rate

refers to the exchange rates used to convert foreign currency transactions or balances to the reporting currency based on the rates in effect at the dates of the transactions or balance sheet dates.

Non-Monetary Assets

Assets that are not held in the form of cash or cash equivalents, such as property, equipment, and intangible assets.

Temporal Method

An accounting technique used for currency translation that uses exchange rates based on the time assets and liabilities are acquired or incurred.