Using Monetary Policy to Address a Recessionary Gap Caused by a Supply

question 269

Multiple Choice

Using monetary policy to address a recessionary gap caused by a supply shock involves _____ to _____.

• A) decreasing the money supply; lower the aggregate price level
• B) increasing interest rates; decrease investment spending
• C) decreasing interest rates; lower the aggregate price level
• D) increasing the money supply; lower the unemployment rate

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Definitions:

Divergent Plate Boundary

A tectonic margin where two lithosphere plates are moving apart from each other, typically resulting in the formation of new oceanic crust through volcanic activity.

Volcanic Eruptions

Explosive events where molten rock (magma), ash, and gases are ejected from a volcano's vent, impacting the surrounding environment and climate.

Landslides

The movement of rock, earth, or debris down a slope due to gravity, often precipitated by factors like water saturation, erosion, or earthquakes.

Magma Movement

The flow or migration of magma through the Earth's crust, which can lead to volcanic eruptions when it reaches the surface.