If the Economy Is in General Equilibrium and the Fed

question 56

Multiple Choice

If the economy is in general equilibrium and the Fed reduces the money supply,

• A)the previous equilibrium combination of output and the real interest rate represents a point of excess demand for money.
• B)the previous equilibrium combination of output and the real interest rate represents a point where saving is greater than investment.
• C)the LM curve shifts down and to the right.
• D)the level of investment spending will increase.

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Definitions:

Long Run

A period in which all factors of production and costs are variable, allowing for adjustment in all inputs and production levels.

Market Entry

The act or process by which a company enters a new market, facing potential barriers and strategizing to penetrate or develop it.

Market Demand

The total quantity of a product or service that all consumers in a market are willing and able to purchase at various prices.

Plumbing Services

Professional services involved in installing, repairing, and maintaining the piping and fixtures associated with water distribution and waste water disposal.