Figure 26-11 -Refer to Figure 26-11. in the Dynamic Model of AD-AS

question 134

Multiple Choice

Figure 26-11
-Refer to Figure 26-11. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, the Federal Reserve would most likely

• A) increase interest rates.
• B) decrease interest rates.
• C) not change interest rates.
• D) decrease the inflation rate.

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Definitions:

Private Wage

Private wage is the compensation or salary paid to employees by private sector firms, as opposed to wages paid by government entities.

Nonunion Labor

Workers who are not members of a labor union and do not receive the wages and benefits negotiated by unions.

Foreign Firms

Companies that conduct business or operations outside their country of origin.

Union Membership

The state of being a registered member of an organized labor union, representing workers in specific industries or professions.