In Response to an Inflationary Gap, the Fed

question 100

Multiple Choice

In response to an inflationary gap, the Fed

• A) waits until the price level falls before acting.
• B) lowers the federal funds rate by buying U.S. government securities.
• C) raises the federal funds rate by selling U.S. government securities.
• D) raises the federal funds rate by buying U.S. government securities.

---

Definitions:

Electrical Motor

A device that converts electrical energy into mechanical energy, typically used to power machines or vehicles.

Overhead

The ongoing expenses of operating a business that are not directly associated with the production of goods or services.

Fixed Manufacturing Overhead

Costs that remain constant regardless of the level of production, related specifically to the manufacturing process, such as rent, utilities, and salaries of permanent staff.

Machine-Hours

A measure of machine usage, representing the total hours a machine operates during a specific period.