Use the Following to Answer Questions

question 212

Multiple Choice

Use the following to answer questions
Figure: Shifts in SRAS and AD
-(Figure: Shifts in SRAS and AD) If the economy is at short-run equilibrium point b because of a negative supply shock,the Fed could enact an expansionary monetary policy,thus shifting the new equilibrium to point _____.As a result of this,the price level would _____ and real output would _____.

• A) a;decrease;further decrease
• B) c;further increase;increase
• C) d;decrease;increase
• D) No monetary policy would have any effect;the equilibrium will remain at point b.

---

Definitions:

Money Supply

The overall total of financial resources found in an economy at a given instance.

Excess Reserves

The reserves banks hold over and above the legal requirement set by the central bank, often seen as a precautionary measure.

Individual Bank

An individual bank refers to a financial institution dealing with deposits and loans of consumers and businesses, distinguishing itself by offering personalized banking products and services.

Depression

An intense and extended period of economic recession marked by a substantial drop in Gross Domestic Product (GDP), elevated rates of joblessness, and a decrease in the general price level of goods and services.