When the Fed Increases the Money Supply to Counteract a Negative

question 55

Multiple Choice

When the Fed increases the money supply to counteract a negative real shock:

• A) growth usually returns to the level it was before the shock.
• B) half of the increase is seen in growth and half in inflation.
• C) inflation increases a lot and growth increases a little.
• D) growth remains stuck at the level of the negative real shock.

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Definitions:

Compounded Monthly

Interest calculated on the principal sum and also on the accumulated interest of previous periods of a deposit or loan, compounded every month.

Equal Payments

Payments that are the same in amount, typically referring to installments paid over a certain period of time.

Outstanding Balance

the amount of money that is still owed or remains unpaid on a loan, credit card, or another financial obligation.

Combined Equivalent

A combined or total equivalent that incorporates various elements or aspects to express a singular value or concept.