If Potential Output Equals 3,000 and Short-Run Equilibrium Output Equals

question 78

Multiple Choice

If potential output equals 3,000 and short-run equilibrium output equals 3,500, there is a(n) ________ gap and the Federal Reserve must ________ real interest rates in order to close the gap.

• A)recessionary; raise
• B)recessionary; reduce
• C)recessionary; not change
• D)expansionary; raise

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Definitions:

Reappraisal

A cognitive process in which an individual changes their emotional response to a situation by altering their interpretation of that situation.

Emotional Responses

The psychological and physical reactions to stimuli that are perceived as significant or important.

Anger

A strong feeling of displeasure or hostility typically sparked by a perceived wrong or injustice.

Ambiguous Visual Cliff

A psychological experiment setup to investigate depth perception and fear of falling in infants.