Refer to the Graphs, Where the Subscripts on the Labels

question 155

Multiple Choice

Refer to the graphs, where the subscripts on the labels denote years 1 and 2. From the graphs we can conclude that from year 1 to year 2,

• A) the economy recovered from a recession.
• B) the economy experienced economic growth and inflation.
• C) output grew and the unemployment rate fell.
• D) the government engaged in expansionary fiscal and monetary policies.

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Definitions:

Bank Reserves

The portion of deposits that banks are required to hold either in cash in their vaults or on deposit with a central bank, as a precaution to ensure bank liquidity.

Reserve Requirement

The minimum amount of reserves that a bank is required to hold by law as a percentage of its deposits, used by central banks to control the money supply.

Open Market Sale

The selling of government bonds and securities in the open market to decrease the money supply.

Money Supply

The whole of economic resources in an economy, represented by cash, coins, and checking and savings accounts' balances, at a given time.