If the Economy Is at Potential Output and the Fed

question 257

Multiple Choice

If the economy is at potential output and the Fed decreases the money supply, in the LONG run real GDP will likely:

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

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Definitions:

Present Value

The amount of money that, if invested today, would grow to a designated future amount. Discounted value of future cash flows.

Straight-Line Depreciation

Depreciation method in which the amount taken to depreciation expense each year is constant and equal to 1/n times the depreciable amount, where n is the depreciable life of the asset.

Salvage Value

The estimated residual value of an asset at the end of its useful life.