Suppose Short-Run Aggregate Supply Shifts to the Left Because of a Decrease

question 210

Multiple Choice

Suppose short-run aggregate supply shifts to the left because of a decrease in the supply of steel. The Federal Reserve fights the resulting recession with expansionary monetary policy. This will

• A) increase interest rates.
• B) decrease inflation.
• C) cause inflation.
• D) increase unemployment.

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Definitions:

Gold Standard

A monetary system where a country's currency or paper money has a value directly linked to gold; countries committed to convert paper money into a fixed amount of gold upon request.

Gold Exchange Standard

A monetary system in which countries peg their currencies to a specific amount of gold but may also hold foreign currencies in reserves.

Euro

The official currency of 19 of the 27 European Union countries, which is used by over 340 million Europeans. The euro aims to facilitate a single European market, foster economic stability, and promote economic integration among its members.

Debtor Nation

A country that owes more to foreign entities than it is owed, having a negative net investment position globally.