Suppose That Initially Real GDP Equals Potential GDP

question 12

Multiple Choice

Suppose that initially real GDP equals potential GDP. Then a decrease in aggregate demand occurs. According to the Taylor rule, the Fed should____________ the federal funds rate by ____________government securities in the open market.

• A) lower; buying
• B) raise; buying
• C) lower; selling
• D) raise; selling

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Definitions:

Harmony and Cohesion

The state of being unified or in agreement within a group, which fosters a positive and collaborative environment.

Climate for Creative Thinking

An environment or organizational culture that fosters innovation, open-mindedness, and the generation of new ideas.

Convergent Thinking

A cognitive process that involves focusing on finding a single, correct solution to a problem by applying logic and analytical skills.

Vision and Mission

A statement of an organization's overarching aspirations and its purpose, serving as a guide for its strategic planning.