Figure: Monetary Policy and Demand Shocks Reference: Ref 16-2

question 53

Multiple Choice

Figure: Monetary Policy and Demand Shocks Reference: Ref 16-2 (Figure: Monetary Policy and Demand Shocks) The original real growth rate of the economy was 3 percent when a negative aggregate demand shock caused a shift of the AD curve from AD1 to AD2. As a result of the Fed's policy response, the AD curve shifted to AD5 in the short run. Which of the following is TRUE about the Fed's policy response?

• A) The Fed responded too little to the shock.
• B) The Fed responded too much to the shock.
• C) The Fed provided just the right amount of response to the shock.
• D) The Fed was too fast in responding to the shock.

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Definitions:

Oral Stage

A stage in Freud's psychosexual development theory focusing on infants' pleasure centers on the mouth during the first 18 months of life.

Personality Development

The ongoing process of developing and shaping one's personality, influenced by genetic, environmental, and social factors.

Defense Mechanism

Psychological strategies employed unconsciously to protect oneself from anxiety arising from unacceptable thoughts or feelings.

Displacement

A defense mechanism where negative emotions or impulses are transferred from the original source to a less threatening object or person.