The Fed

question 276

Multiple Choice

The Fed

• A)can easily distinguish the minor ups and downs of the economy from a recession.
• B)can have difficulty distinguishing the minor ups and downs of the economy from a recession.
• C)always times its policy responses correctly.
• D)can easily determine if a drop in production means a recession is inevitable.

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Definitions:

Price

The amount of money expected, required, or given in payment for something. It serves as a signal between buyers and sellers in a market.

Labor

The human effort, both physical and mental, used in the production of goods and services.

Substitution Effect

The change in quantity demanded of a good or service as consumers switch to or from substitutes when the price changes.

Income Effect

The change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service.