Use the Following to Answer Questions

question 206

Multiple Choice

Use the following to answer questions:
Figure: Monetary Policy I
-(Figure: Monetary Policy I) Refer to Figure: Monetary Policy I. If the economy is initially in equilibrium at E₂ and the central bank chooses to buy Treasury bills, _____ shift to _____ a(n) _____ gap.

• A) AD₂ will; the right, causing; inflationary
• B) AD₂ will; AD₁, causing; recessionary
• C) AD₁ will; AD₂, closing; recessionary
• D) AD₁ will; the left, increasing; recessionary

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Definitions:

Promissory Estoppel

A legal principle that prevents a party from withdrawing a promise that another party has reasonably and substantially relied on, even if no formal contract exists.

Past Consideration

A promise to give another something of value in return for goods or services rendered and delivered in the past.

Bargained-For-Agreement

An arrangement reached after negotiation between parties, where each side gives something in exchange for what it receives.

Forbearance

An agreement between a lender and a borrower to temporarily suspend debt payments.