Assume That Because of a Long Policy Lag,the Fed Starts

question 164

Multiple Choice

Assume that because of a long policy lag,the Fed starts implementing expansionary monetary policy too late,i.e.,at a time when the economy is already healing itself.As a result,the economy will probably move from an initial

• A) recessionary gap to an even deeper recessionary gap.
• B) recessionary gap to an inflationary gap.
• C) inflationary gap to the natural level of Real GDP.
• D) inflationary gap to a recessionary gap.

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Definitions:

GAAP

Generally Accepted Accounting Principles, a set of accounting standards and procedures used in the United States to ensure financial statements are consistent and transparent.

IFRS

International Financial Reporting Standards - a set of accounting guidelines that provide the basis for cross-border financial reporting.

Specific Identification

An inventory valuation method in which the cost of each specific item in inventory is tracked and used to calculate cost of goods sold.

LIFO

Last In, First Out, a method of inventory accounting where items produced last are considered the first to be sold.