If Government Purchases Increase and as a Result Push Current

question 52

Multiple Choice

If government purchases increase and as a result push current output above potential output, monetary policymakers are likely to:

• A) lower the real interest rate.
• B) raise the real interest rate.
• C) keep the real interest rate constant and focus on only changing the nominal interest rate.
• D) purchase Treasury securities.

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Definitions:

Accept

To receive or take willingly something that is offered; to agree to or consent to a proposal or offer.

Outcome

The result or effect of an action, situation, or event.

Fulfilled

The feeling or state of being satisfied or completed, especially in terms of meeting one’s needs or achieving one’s goals.

Needs

The requirements necessary to maintain life and achieve personal fulfillment.