If Aggregated Demand Is Growing Faster Than Potential Output, Then

question 15

Multiple Choice

If aggregated demand is growing faster than potential output, then the Federal Reserve is likely to

• A)lower interest rates because the rate of inflation is falling or is likely to fall.
• B)raise interest rates because the rate of inflation is rising or is likely to rise.
• C)raise interest rates because the rate of inflation is falling or is likely to fall.
• D)lower interest rates because the rate of inflation is rising or is likely to rise.
• E)do nothing because it is not clear how the rate of inflation will be affected.

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Definitions:

Actual Hours

The real number of hours worked or spent on a particular activity or project, as opposed to planned or estimated hours.

Standard Hours

The preset amount of time expected to complete a task or work process in an efficient manner.

Units Produced

This refers to the total number of complete units manufactured during a specific period by a company.

Fixed Factory Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs based on the volume of production.