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:

Title

Title refers to the legal right to own or use property, evidenced by a document showing ownership such as a deed.

Buyer

A person or entity that purchases goods or services from another.

Agreement

A mutual understanding or arrangement, typically formalized by a contract, between two or more parties regarding their rights and obligations.

Warranty Of Title

A guarantee provided by a seller to a buyer that they legally own the item being sold and have the right to sell it, free from any claims by others.