If the Fed Increases the Money Supply in Response to Positive

question 39

Multiple Choice

If the Fed increases the money supply in response to positive demand shocks,it

• A) lowers the interest rate
• B) reduces each type of unemployment
• C) adds its own positive demand shock
• D) creates financial stability
• E) crowds out private investment

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Definitions:

Operant Conditioning

A method of learning that employs rewards and punishments for behavior, which increases or decreases the likelihood of a behavior being repeated.

Passive Avoidance Learning

A form of learning in which an individual learns to refrain from certain behaviors as a result of experiencing or anticipating negative consequences.

Punishment

A process in behavioral psychology where an unfavorable outcome follows an undesirable behavior, aiming to decrease the probability of the behavior recurring.

Omission Training

A learning process where a desired behavior is reinforced by the removal of an undesired outcome.