Figure 18-2 -Refer to Figure 18-2.In the Graph Above,if the Economy Is

question 144

Multiple Choice

Figure 18-2

-Refer to Figure 18-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by Congress and the president would be to

• A) lower the discount rate of interest.
• B) execute an open market sale of government securities.
• C) increase government transfer payments.
• D) increase marginal income tax rates.

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Definitions:

Expected Inflation

Expected inflation is the rate at which the general price level of goods and services is anticipated to rise over a specific period.

Unemployment Rate

The percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

Friedman-Phelps

An economic theory associated with Milton Friedman and Edmund Phelps, focusing on the natural rate of unemployment and the relationship between inflation and unemployment.

Actual Inflation

The real rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.