If Aggregated Demand Is Growing Faster Than Potential Output, Then

question 15

Multiple Choice

If aggregated demand is growing faster than potential output, then the Federal Reserve is likely to

• A)lower interest rates because the rate of inflation is falling or is likely to fall.
• B)raise interest rates because the rate of inflation is rising or is likely to rise.
• C)raise interest rates because the rate of inflation is falling or is likely to fall.
• D)lower interest rates because the rate of inflation is rising or is likely to rise.
• E)do nothing because it is not clear how the rate of inflation will be affected.

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Definitions:

Other Expenses

Expenditures that are not directly related to the production of goods or services, such as administrative and selling expenses.

Wells Serviced

The number of oil, gas, or water wells that have undergone maintenance, repair, or any other service by a company during a given period.

Corporate Function

Essential activities or roles within an organization that support its core business operations, such as human resources, finance, and IT.

Flexible Budget

A budget that adjusts or varies with changes in volume or activity, allowing for more accurate costing and financial planning.