If the Economy Is at Potential Output and the Fed

question 104

Multiple Choice

If the economy is at potential output and the Fed increases the money supply, in the SHORT run interest rates will likely:

• A)increase.
• B)decrease.
• C)remain constant.
• D)fluctuate randomly

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Definitions:

Variable Manufacturing

Costs that vary directly with the level of production, such as raw materials or labor directly involved in making products.

Labour Cost

The total expenditure incurred by employers to compensate their employees, including wages, benefits, and payroll taxes.

Labour Rate

The amount of money that is paid for a specific quantity of labor, often referred to as the wage rate.

Labour Hours

The total hours worked by employees in the production of goods or delivery of services.