Suppose Investment Spending Falls

question 65

Multiple Choice

Suppose investment spending falls.To offset the change in output the Federal Reserve could

• A)increase the money supply.This increase would also move the price level closer to its value before the decline in investment spending.
• B)increase the money supply.However,this increase would move the price level farther from its value before the decline in investment spending.
• C)decrease the money supply.This decrease would also move the price level closer to its value before the decline in investment spending.
• D)decrease the money supply.However,this increase would move the price level farther from its value before the decline in investment spending.

---

Definitions:

Skyscraper

A tall, continuously habitable building of many floors, usually designed for office, commercial, and residential use.

Efficiency Wage

A higher-than-market wage paid by employers to increase worker productivity, loyalty, and reduce turnover.

Market Failure

A situation in which the market does not allocate resources efficiently, leading to a loss of economic and social welfare.

Unemployment

This indicates the condition of being jobless despite the willingness and capability to work, measured as a percentage of the labor force.