A Decrease in a Broad Index of Commodity Prices Suggests

question 52

Multiple Choice

A decrease in a broad index of commodity prices suggests to the Fed that

• A) money is plentiful, and the Fed should conduct restrictive policy.
• B) money is plentiful, and the Fed should conduct expansionary policy.
• C) deflation is a potential future danger, and the Fed should conduct expansionary policy.
• D) future prices will likely increase, and the Fed should conduct expansionary policy.

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Definitions:

Capitalism

An economic system in which most economic decisions are made by private owners and most of the means of production are privately owned.

Government Intervention

Actions taken by a government to influence the economy beyond its basic regulations, including fiscal and monetary policies.

Classical Economists

Economists from the 18th and 19th centuries who focused on the importance of free markets, competitive forces, and the self-regulating nature of economies.

Demand

The desire and ability of consumers to purchase goods and services at given prices, influencing market equilibrium and pricing strategies.