Which of the Following Was a Consequence of the Federal

question 75

Multiple Choice

Which of the following was a consequence of the Federal Reserve Board's 1981 decision to tighten the money supply?

• A) The inflation rate increased.
• B) Interest rates began a slow but steady decline.
• C) Economic activity declined and the unemployment rate increased.
• D) Federal budget deficits were brought under control.

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Definitions:

Total Fixed Cost

The sum of all costs that do not change with output level, including rent, salaries, and insurance.

Short Run

A period in economic analysis during which at least one input, such as plant size or capital, is fixed, limiting the ability to adjust to demand changes.

Long Run

A period in which all factors of production and costs are variable, allowing for full adjustment to changes in the economic environment.

Specialization

The process of focusing effort and resources on a limited number of activities, goods, or services to gain a comparative advantage in production.