Suppose Government Purchases Have Decreased

question 85

Multiple Choice

Suppose government purchases have decreased. Which of the following is true?

• A)If inflation is lower in the new equilibrium, the Fed has allowed the target rate of inflation to drift up.
• B)If inflation is constant in the new equilibrium, the Fed has decreased the target rate of inflation.
• C)If inflation is lower in the new equilibrium, the Fed has allowed the target rate of inflation to drift down.
• D)If inflation is lower in the new equilibrium, there has been no change in the target rate of inflation.
• E)If inflation is constant in the new equilibrium, the Fed has increased the target rate of inflation.

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Definitions:

Acquisition

The act of gaining control over another company or business entity by buying it or merging with it.

Weighted Average Cost

A method of calculating the cost of goods available for sale that considers the cost of goods at varying times and at different purchase costs.

Computation

The process of performing mathematical calculations or processing information to achieve a result.

Debt-equity Ratio

A metric that evaluates the financial leverage of a company, determined by dividing the total amount of its liabilities by its shareholder equity.