Suppose the Economy Is Currently in Equilibrium, with Unemployment Equal

question 51

Multiple Choice

Suppose the economy is currently in equilibrium, with unemployment equal to the natural rate, and that people form expectations rationally. If the Federal Reserve announces that it is going to decrease the money supply, then the economy will

• A) permanently move to a higher level of output and a higher price level.
• B) move to a lower price level but remain at potential GDP.
• C) permanently move to a lower level of output and a lower price level.
• D) move to a higher GDP level but remain at a constant price level.

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Definitions:

Business Messages

Refers to written or electronic communication tailored for and circulated within a professional setting, aimed at conveying specific objectives or information related to business activities.

Direct Order

A command or instruction given with clear and definitive terms, leaving no room for ambiguity or discretion.

Direct Order

A clear, concise instruction or command that leaves no room for misunderstanding or interpretation.

Good-news Messages

Communications that convey positive information, congratulations, or favorable outcomes, often intended to build goodwill.