When Current Real Output Exceeds Potential Real Output, the Federal

question 128

Multiple Choice

When current real output exceeds potential real output, the Federal Reserve will _____ interest rates in an effort to fight _____.

• A) increase; a recession
• B) decrease; a recession
• C) decrease; inflation
• D) increase; inflation

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Definitions:

Cost

A sacrifice made to obtain some benefit.

Activity

In accounting and finance, it typically refers to the level of business operations or transactions in a given period.

Relevant Activity Base

A factor that causes changes in the behavior of costs, used to allocate fixed costs to cost objects effectively.

Decision-Making Needs

Requirements or information essential for making informed choices or judgments in various situations.