Figure 14-3 Suppose the Economy Was Currently Operating at SRAS

question 76

Multiple Choice

Figure 14-3 Suppose the economy was currently operating at SRAS and AD₂ in Figure 14-3. To combat inflation, the Fed institutes restrictive monetary policy. Suppose that by the time the policy impacts the economy, AD has already moved to AD₁. Which of the following would be true?

• A) The policy would cause the economy to fall further into a recession than it would have if the Fed had not undertaken the policy.
• B) The policy will help by preventing the recession from becoming worse.
• C) The policy would cause the economy to go into an economic boom.
• D) This is a trick question; the impact of monetary policy is felt immediately by the economy.

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Definitions:

Tax Per Unit

A fixed amount of tax imposed on each unit of a product or service sold.

Observable Culture

The part of organizational culture that is visible in the way members behave, and in the stories, heroes, rituals, and symbols that are part of daily organizational life.

Organization

A structured group of people working together towards a common goal, which could be corporate, governmental, or non-profit in nature.

Organizational Culture

The system of shared beliefs and values that guides behaviour in organizations.