If the Economy Is at Potential Output and the Fed

question 167

Multiple Choice

If the economy is at potential output and the Fed decreases the money supply so that actual output is less than potential output, eventually nominal wages will_____ and short-run aggregate supply will _____.

• A) increase; increase
• B) increase; decrease
• C) decrease; increase
• D) decrease; decrease

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Definitions:

Officer

An individual holding a position of authority or command, especially within a governmental, military, or corporate structure, responsible for enforcing laws or policies.

Shareholders

Investors in a corporation, who own the corporation.

Dividends

Payments made by a corporation to its shareholders, usually derived from profits.

Two-Tier Board

A corporate board structure consisting of two separate boards: the supervisory board and the management board, each with distinct responsibilities.