(Figure: Shifts in SRAS and AD) If the Economy Is

question 243

Multiple Choice

(Figure: Shifts in SRAS and AD) If the economy is at short-run equilibrium point b because of a negative supply shock, the Federal Reserve may focus on price stability and enact a restrictive monetary policy, thus shifting the new equilibrium to point _____. As a result of this, the price level would _____ and real output would _____.

• A) a; decrease to its previous level; further decrease
• B) c; further increase; increase
• C) d; decrease; increase
• D) No monetary policy would have any effect; the equilibrium would remain at point b.

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Definitions:

Financial Position

A snapshot of a company’s financial condition at a specific moment in time, encompassing assets, liabilities, and equity.

Equity Multiplier

A financial ratio that measures the proportion of a company's total assets financed by its shareholders' equity.

Return On Equity

Return on Equity (ROE) measures a company's profitability by calculating how much profit a company generates with the money shareholders have invested.

Total Asset Turnover

A financial ratio that measures how efficiently a company uses its total assets to generate sales revenue.