If the Federal Reserve Wants to Close an Inflationary Gap

question 291

Multiple Choice

If the Federal Reserve wants to close an inflationary gap, it will _____ the money supply and _____ the interest rate, thus _____ investment spending and GDP. The AD curve will shift to the _____.

• A) increase; raise; increasing; right
• B) increase; lower; lowering; left
• C) decrease; raise; lowering; left
• D) decrease; lower; lowering; right

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Definitions:

Coup d'état

A sudden and decisive action in politics, especially one resulting in a change of government illegally or by force.

European Commission

An institution of the European Union responsible for proposing legislation, implementing decisions, upholding the EU treaties, and managing the day-to-day business of the EU.

Economic Strength

A measure of a country's or region's financial health and ability to withstand economic challenges, often assessed by GDP, employment rates, and other economic indicators.

European Economic Integration

The process of blurring national boundaries within Europe to create a single economic space through mechanisms like the European Union, aimed at promoting free trade, mobility, and shared economic policies.