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:

Self-Regard

The perception and evaluation of oneself, often in terms of self-esteem or self-worth.

Empathy

The ability to understand and share the feelings of another person from their perspective.

Generativity Versus Stagnation

A stage in Erik Erikson's theory of psychosocial development where middle-aged adults face the challenge of contributing to the next generation or feeling a lack of purpose.

Erik Erickson

A developmental psychologist known for his theory on the psychosocial development of human beings.