In the Aggregate Supply-Aggregate Demand Model, Raising the Federal Funds

question 135

Multiple Choice

In the aggregate supply-aggregate demand model, raising the federal funds rate initially

• A) increases long-run aggregate supply.
• B) decreases long-run aggregate supply.
• C) increases aggregate demand.
• D) decreases aggregate demand.

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Definitions:

Effective Interest Method

A technique used in accounting to allocate loan discounts or premiums over the life of the loan to the periods benefiting from the loan, reflecting a constant rate of interest.

Carrying Amount

The book value of an asset or liability; for assets, it is typically based on original cost less depreciation.

Straight-Line Amortization

A method of evenly allocating the cost of an intangible asset over its useful life.

Callable

A term used to describe a financial security that the issuer can redeem prematurely under specific conditions.