The Fed Can Use Which of the Following as an Intermediate

question 23

Multiple Choice

The Fed can use which of the following as an intermediate target?

• A)the level of real GDP
• B)the level of nominal GDP
• C)both an interest rate and a monetary aggregate at the same time
• D)either a monetary aggregate or an interest rate but not at the same time

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with cheaper alternatives.

Margin

Margin refers to the difference between the selling price of a good or service and its cost of production, also used to describe profit margin or markup.

Total Revenue Product

The total revenue generated by a factor of production, calculated by multiplying the marginal product of the factor by the market price of the output.

Marginal Revenue Product

The additional revenue generated from utilizing one more unit of an input, like labor or capital.