If the Fed Responds to Repeated Decreases in the Short-Run

question 17

Multiple Choice

If the Fed responds to repeated decreases in the short-run aggregate supply with repeated increases in the quantity of money, the economy will be faced with

• A) a one-time increase in prices.
• B) continuous inflation.
• C) alternating periods of inflation and deflation.
• D) steady decreases in real GDP.

---

Definitions:

Dividends

Money distributed by a corporation to its members, sharing a part of the company's income.

Investment Adjustment

The process of modifying the value of an investment portfolio due to changes in asset values, investment performance, or investment strategy.

Semiannual Interest

Interest that is computed and disbursed semi-annually, commonly found in agreements for bonds and loans.

Bonds Dated

The date at which the bond is issued, establishing when interest payments will start to accrue and when the bond becomes mature for repayment.