Analyze the Following Statement,and Show What Would Happen in the Long

question 55

Essay

Analyze the following statement,and show what would happen in the long run if such advice were followed by the Fed: "The increase in the stock market has increased people's wealth.As a result,their consumption has increased,increasing aggregate demand and output.So the Fed needs to increase the money supply,since with higher income,people's demand for real money balances will be higher."

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Definitions:

Pathological Personality Traits

Enduring, inflexible, and maladaptive patterns of thought, emotion, and behavior that deviate significantly from cultural expectations and cause distress or impairment.

DSM-5

The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition, a comprehensive classification of officially recognized psychiatric disorders.

Big 5 Traits

A theory in psychology that identifies five primary dimensions of personality: openness, conscientiousness, extraversion, agreeableness, and neuroticism.

DSM-5

Diagnostic and Statistical Manual of Mental Disorders, 5th Edition; a manual published by the American Psychiatric Association that categorizes and describes mental health disorders.