An Increase in the Output Gap Causes the Demand for Real

question 20

Multiple Choice

An increase in the output gap causes the demand for real balances

• A) to rise and the interest rate to fall.
• B) to fall and the interest rate to rise.
• C) and the interest rate to fall.
• D) and the interest rate to rise.

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Definitions:

Liable

The condition of being legally accountable for specific actions or responsibilities, particularly in relation to debts or legal duties.

Oral Stop-Payment Order

A verbal instruction to a financial institution to cancel the payment process of a check or transaction.

Good

An item or product that is manufactured or produced for sale, often tangible, and exchanged in the marketplace.

Deposit Agreement

A legal arrangement wherein one party places an asset under the control of another party, often a financial institution, with specific terms governing its management and disposal.