When the Economy Is in a Recession, the Fed Can

question 76

Multiple Choice

When the economy is in a recession, the Fed can _{--------------------}the federal funds rate, which_{--------------------} aggregate demand and _{--------------------}real GDP.

• A)raise; increases; decreases
• B)raise; decreases; increases
• C)lower; increases; increases
• D)lower; increases; decreases
• E)lower; decreases; decreases

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Definitions:

Consumer Surplus

A measure of the difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.

Price

The price one must pay to obtain a service or product.

Surplus Amount

The excess of revenues over expenditures in a budget, or inventory beyond what is currently needed.

Consumer Surplus

The gap between what consumers are prepared to spend on a good or service and what they end up paying.