Suppose That Initially Real GDP Equals Potential GDP

question 176

Multiple Choice

Suppose that initially real GDP equals potential GDP. Then an increase in aggregate demand occurs. According to the Taylor rule, the Fed should ________ the federal funds rate by ________ government securities in the open market.

• A) raise; selling
• B) lower; selling
• C) raise; buying
• D) lower; buying

---

Definitions:

Superior Performance

Outstanding levels of achievement or productivity in work or a specific task, often exceeding the standard expectations.

Contingency Planning

The process of preparing for unexpected events by developing strategies and actions to mitigate risks and ensure organizational continuity.

Identical

Exactly the same, or very similar in every detail.

Participatory Planning

Planning that includes the persons who will be affected by plans and/or those who will implement them.