Consider a Simple Macro Model with a Constant Price Level

question 28

Multiple Choice

Consider a simple macro model with a constant price level and demand- determined output. If national income is above its equilibrium level, it is likely that inventories are , and so national income tends to .

• A)being depleted; fall
• B)being depleted; rise
• C)accumulating; rise
• D)constant: fall
• E)accumulating; fall

---

Definitions:

Monetary Policy

The process by which a central bank, currency board, or regulatory authority manages the money supply to achieve specific goals such as controlling inflation, maintaining employment, and stabilizing the currency.

Federal Reserve System

The central banking system of the United States, which oversees the nation's monetary policy, regulates banks, maintains financial stability, and provides financial services.

Board of Governors

An executive or administrative arm of an organization or system, often responsible for making key decisions and overseeing operations.

Reserve Requirements

Central bank regulations that set the minimum amount of reserves that must be held by commercial banks.