If Real GDP Exceeds Potential GDP, to Move the Economy

question 1

Multiple Choice

If real GDP exceeds potential GDP, to move the economy to potential GDP, the Reserve Bank

• A) raises the cash rate to decrease real GDP but not potential GDP.
• B) lowers the cash rate to increase potential GDP but not real GDP.
• C) lowers the cash rate to decrease real GDP but not potential GDP.
• D) raises the cash rate to increase potential GDP but not real GDP.
• E) raises the cash rate to decrease both real GDP and potential GDP.

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Definitions:

Parasitic

Describes organisms that live on or in a host organism and cause harm to the host.

Scavenging

The act of consuming dead or decaying organic material, a behavior observed in some animals, bacteria, and fungi.

Ectotherm

Animal in which internal temperature is regulated by changes in behavior; for example, a fish or a lizard.