In Response to an Inflationary Gap, the Fed

question 161

Multiple Choice

In response to an inflationary gap, the Fed

• A) raises the federal funds rate by selling U.S. government securities
• B) lowers the federal funds rate by buying U.S. government securities.
• C) lowers the federal funds rate by buying U.S. government securities.
• D) waits until the price level falls before acting.

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Definitions:

Lateral Acceleration

The rate of change of velocity of a body in a direction perpendicular to its direction of motion, often measured in vehicles to determine cornering capabilities.

Body Roll

The tilting or leaning of a vehicle's body to one side, especially noticeable when turning corners due to centrifugal force.

Stabilizer Bar

A steel bar attached to the lower control arms or axle assembly and to the body or frame; designed to minimize body roll when the vehicle is cornering. Also called sway bar or anti-roll bar.

Leaf Springs

A simple form of spring commonly used for the suspension in wheeled vehicles, consisting of several layers of metal bound together to absorb shocks.