Assume That the Price Level Is flExible Both Upward and Downward

question 54

Multiple Choice

Assume that the price level is flexible both upward and downward and that the Fed's policy is to keep the price level from either rising or falling. If aggregate supply increases in the economy, the Fed

• A) will have to increase interest rates to keep the price level from falling.
• B) will have to reduce the money supply to keep the price level from rising.
• C) will have to increase the money supply to keep the price level from falling.
• D) can keep the price level stable without altering the money supply or interest rate.

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Definitions:

Cephalocaudal Development

A pattern of growth where physical development starts from the head and moves towards the feet.

Embryo

An early stage of development in multicellular organisms, in humans, it refers to the period from fertilization until the eighth week of pregnancy.

Top Down

A processing approach where perception starts with the input of a general idea or framework before breaking down into smaller components.

Radiation

The emission of energy as electromagnetic waves or as moving subatomic particles, especially high-energy particles that cause ionization.