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If the Economy Is at Potential Output and the Fed

question 170

Multiple Choice

If the economy is at potential output and the Fed decreases the money supply, in the SHORT run the price level will likely_____ and real GDP will likely_____ .


Definitions:

Ordinary Annuity

Consecutive settlements of equal value made at the end of each period over an established length of time.

Annuity Due

A financial product that pays out a series of payments at the beginning of each period, such as monthly or annually.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, commonly used to appraise long-term projects.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis. It reflects the opportunity cost of capital.

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