If the Fed Responds to an Increase in Aggregate Demand

question 298

Multiple Choice

If the Fed responds to an increase in aggregate demand by increasing the quantity of money,

• A) money wage rates will fall to reduce the unemployment.
• B) output will begin to decrease more rapidly than otherwise.
• C) there will be continued inflation.
• D) nothing happens because aggregate demand had already increased.

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Definitions:

Crude Oil

A naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials, used as a primary energy source.

Industry Output

The total production of goods and services produced by a specific sector of the economy over a given period.

Marginal Cost

The cost incurred from producing one additional unit of a good or service.

Fixed Cost

Costs that do not vary with the level of production or sales, remaining constant regardless of the amount of goods or services produced.