If the Economy Is in a Long-Run Equilibrium When the Federal

question 68

Multiple Choice

If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.

• A)it would likely conduct a tightening of monetary policy by raising the real interest rate for any given inflation rate
• B)it would likely conduct an easing of monetary policy by lowering the real interest rate for any given inflation rate
• C)it would likely conduct an easing of monetary policy where the real interest rate would increase due to the ensuing decrease in aggregate demand
• D)it would likely conduct a tightening of monetary policy where the real interest rate would increase due to the ensuing increase in aggregate demand
• E)none of the above

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Definitions:

Profits

Financial gains realized when the revenue earned from business activities exceeds the expenses, costs, and taxes involved in sustaining the activities.

Intercept

In the context of linear regression, this represents the expected value of the dependent variable when all independent variables are zero; it is the point at which the regression line crosses the y-axis.

Least-squares Regression Line

The least-squares regression line minimizes the squared differences between observed and predicted values, providing the best fit line through data points.

Forbes 500 List

An annual list published by Forbes magazine that ranks the top 500 U.S. companies based on their revenue.