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Suppose Aggregate Demand Is Too High to Bring About the Natural

question 33

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Suppose aggregate demand is too high to bring about the Natural Real GDP level.A Keynesian policy prescription would call for a(n) _____________________ to close this inflationary gap.


Definitions:

Reserve Requirement Ratio

The fraction of deposits that banks are required to hold in reserve, either in their vaults or with the central bank, not used for loans.

Checkable Deposits

Deposits in bank accounts that can be withdrawn using checks, debit cards, or digital transactions, comprising a significant part of the money supply.

Required Reserves

are the minimum amounts of funds that banks must hold in reserve against deposits, as mandated by central banks.

Federal Funds Target Rate

The interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight, guided by the Federal Reserve.

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