A Favorable Supply Shock Causes the Price Level to

question 25

Multiple Choice

A favorable supply shock causes the price level to

• A)rise.To counter this a central bank would increase the money supply.
• B)rise.To counter this a central bank would decrease the money supply.
• C)fall.To counter this a central bank would increase the money supply.
• D)fall.To counter this a central bank would decrease the money supply.

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Definitions:

Treasury Bills

Short-term government securities issued with a promise to be paid back at a specified future date with a fixed interest rate.

Federal Reserve District Bank

A regional bank of the Federal Reserve System, overseeing banks within a specific district and participating in monetary policy to help regulate the economy.

Duluth

A port city in the U.S. state of Minnesota, known for its shipping, cultural activities, and as a gateway to Lake Superior.

Minneapolis

A major city in Minnesota, United States, known for its parks and lakes, as well as being a cultural and economic hub.