Expansionary Monetary Policy to Prevent Real GDP from Falling Below

question 158

Multiple Choice

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

• A)higher; higher
• B)higher; lower
• C)lower; higher
• D)lower; lower

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Definitions:

Elasticity

A general concept measuring the responsiveness of one variable to changes in another variable.

Efficiency Loss

The loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.

Marginal Tax Rate

The tax rate paid on an additional dollar of income.

State And Local Taxes

Taxes imposed by individual states and local governments in the U.S. on income, property, sales, and other activities to fund public services.