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:

Afferent

Relating to or denoting nerve fibers that carry sensory information toward the central nervous system.

Efferent

Referring to nerve fibers that carry signals away from the central nervous system to the peripheral effectors, such as muscles or glands.

Midbrain

A portion of the central nervous system associated with vision, hearing, motor control, sleep/wake, arousal (alertness), and temperature regulation.

Gray Matter

The darker-colored regions of the brain and spinal cord consisting mainly of neuronal cell bodies and branching dendrites.