When the Fed Uses Contractionary Policy

question 141

Multiple Choice

When the Fed uses contractionary policy

• A)the price level rises higher than it would if the Fed did not pursue policy.
• B)the price level rises less than it would if the Fed did not pursue policy.
• C)it does not change the price level.
• D)it causes inflation.

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Definitions:

Economic Forecasts

Predictions or estimates about future economic conditions and trends, often based on statistical models and current data.

Probabilities

The measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.

Cost Of Capital

The rate of return that a company must earn on its investments to maintain its market value and attract funds.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment or project.