What Happens to the Aggregate Demand Curve When the Fed

question 160

Multiple Choice

What happens to the aggregate demand curve when the Fed reduces the money supply?

• A) It shifts leftward, lowering real GDP and the price level.
• B) It shifts leftward, raising real GDP and the price level.
• C) It shifts leftward, lowering real GDP but raising the price level.
• D) It shifts rightward, raising real GDP and the price level.
• E) It shifts rightward, lowering real GDP but raising the price level.

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Definitions:

Consolidation

The process of combining the financial statements of a parent company with those of its subsidiaries to present the accounts as if the group of companies was a single entity.

Cost Method

An accounting technique used to record investments at their original purchase cost, adjusting for dividends received and not for changes in market value.

Equity Method

An accounting method for recording investments in which the investor recognizes income from the investee in proportion to its share of the investee’s profit or loss.

Investment in Subsidiary

Refers to the holding of shares or interests by one company (the parent company) in another company (the subsidiary).