Suppose the National Activity Index of the Federal Reserve Bank

question 70

Multiple Choice

Suppose the National Activity Index of the Federal Reserve Bank of Chicago hovered around +0.25 for a few months but then dropped to -1.5 in November. What is the BEST interpretation of this finding?

• A) The economy grew at a rate of 0.25% for a few months, but economic growth actually decreased by 1.5% in November.
• B) The rate of economic growth slowed in November, but the economy did not move into a recession.
• C) The economy was in an expansion in October but moved into a recession in November.
• D) Economic activity was above the historical trend rate of growth, but it is likely that the economy moved into a recession in November.

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Definitions:

Laffer Curve

A theoretical representation of the relationship between tax rates and the amount of tax revenue collected by governments, indicating an optimal tax rate that maximizes revenue.

Tax Revenue

The income that is gained by governments through taxation, crucial for funding public services and infrastructure.

Price Ceiling

A legal maximum price set by the government for a particular good or service, intended to prevent prices from becoming excessively high.

Shortage

A situation where the demand for a product exceeds its supply in a market.