If the Economy Is at Potential Output and the Fed

question 64

Multiple Choice

If the economy is at potential output and the Fed increases the money supply, in the short run the price level will likely:

• A) fluctuate randomly.
• B) remain the same.
• C) decrease.
• D) increase.

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Definitions:

Loanable Funds

The market where savers supply funds to borrowers, typically through financial intermediaries, affecting interest rates and economic activity.

National Saving

The total amount of savings in a country, equal to the sum of private and public savings.

Domestic Investment

The total amount of investment in physical assets like buildings, machinery, and technology, within a country’s borders.

National Saving

The total savings of a nation, calculated as the sum of private and public saving, representing the part of national income not consumed or spent by the government.