If Aggregate Demand Shifts Because of a Wave of Optimism

question 125

Multiple Choice

If aggregate demand shifts because of a wave of optimism about stock prices, those who favor a policy that "leans against the wind" would advocate the

• A)Federal Reserve increase the money supply or the government increase taxes.
• B)Federal Reserve increase the money supply or the government decrease taxes.
• C)Federal Reserve decrease the money supply or the government increase taxes.
• D)Federal Reserve decrease the money supply or the government decrease taxes.

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Definitions:

Conditional Probability

The probability associated with an event under the condition that a separate event has already transpired.

P(A And B)

The probability that events A and B both occur in a probabilistic experiment.

P(A Or B)

P(A Or B) represents the probability that either event A or event B occurs, including the case where both may occur.

Probability Tree

A diagram that shows the possible outcomes of a series of related choices or events, and their probabilities.