If the Economy Is at Potential GDP and the Fed

question 3

Multiple Choice

If the economy is at potential GDP and the Fed makes an open market sale of government securities,in the long run the aggregate ________ curve shifts ________ and the price level ________.

• A) demand; rightward; rises
• B) supply; leftward; rises
• C) demand; leftward; falls
• D) supply; leftward; falls

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Definitions:

Subsidies

Financial support provided by the government to decrease the cost of goods and services for producers or consumers.

Mortgages

Loans specifically designed for the purchase of real estate, where the property itself serves as security against the loan until it is fully repaid.

Eisenhower

Refers to Dwight D. Eisenhower, the 34th President of the United States, who served from 1953 to 1961 and led significant domestic and international policies during the Cold War.

Ngo Dinh Diem

The first President of South Vietnam, noted for his authoritarian regime and relationship with the United States during the Vietnam War.