If the Fed Raises the Interest Rate, the First Effect

question 225

Multiple Choice

If the Fed raises the interest rate, the first effect in an AS/AD figure is a ________ shift of the ________ curve.

• A) rightward; AD
• B) leftward; AD
• C) rightward; SAS
• D) leftward; SAS

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Definitions:

Marginal Product

The additional output resulting from the use of one more unit of a production input, keeping other inputs constant.

AVC

Average Variable Cost, which is the total variable costs divided by the quantity of output produced.

ATC

A restated definition for Average Total Cost; it implies the cost per unit produced when both fixed and variable costs are accounted for across all levels of output.

AFC

Average Fixed Cost, which is the fixed costs of production spread out over the number of units produced, declining as production increases.