With the Economy in Long-Run Equilibrium, If the Fed Moves

question 75

Multiple Choice

With the economy in long-run equilibrium, if the Fed moves unexpectedly to raise aggregate demand by increasing the reserves of depository institutions through substantial open market purchases, what happens in the short-run?

• A)Interest rates will fall.
• B)Inventories will decline unexpectedly.
• C)There will be upward pressure on output prices.
• D)All of the above are correct.

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Definitions:

Incremental Theorists

Individuals who believe that their abilities and intelligence can grow and change through effort and experience.

Fixed

A characteristic, value, or condition that remains constant and unchanged across different situations or over time.

Stable

Referring to something that is not likely to change or move; in psychology, it may refer to consistent personality traits or conditions.

Internal Attributions

The process of attributing the cause of one's own or another's behavior to internal, personal characteristics rather than to external factors.