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:

Learned Helplessness

a condition in which a person suffers from a sense of powerlessness, arising from a traumatic event or persistent failure to succeed, leading to decreased motivation and depression.

Martin Seligman

A psychologist known for his work on learned helplessness, positive psychology, and interventions that can prevent depression.

Unipolar Depression

A major depressive disorder characterized by a persistent feeling of sadness or a lack of interest in external stimuli, without the mood swings seen in bipolar disorder.

Severe

Used to describe something very intense, serious, or extreme in nature.