If a Recession Were the Result of Monetary Policy, We

question 47

Multiple Choice

If a recession were the result of monetary policy, we should observe:

• A)Inflation increasing as output decreases
• B)Potential output decreasing
• C)Interest rates rising as output falls
• D)A high rate of money growth

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Definitions:

Money Supply

The aggregate amount of economic resources in terms of money, inclusive of cash, coins, and savings and checking account balances, at a particular moment.

Real Output

The total value of all goods and services produced by an economy, adjusted for inflation, reflecting the actual productive capacity.

Business Fluctuations

Variations in the growth rate of an economy over time, including periods of expansion and contraction.

Money Supply

The overall volume of fiscal assets in an economy, which includes cash, coins, and amounts in checking and savings accounts, at a certain time.