Consider an Economy That Is Facing a Recessionary Gap

question 48

Multiple Choice

Consider an economy that is facing a recessionary gap. The Federal Reserve decides to use expansionary monetary policy to close that gap. As a result of this policy, in the short run the money supply will _____, the interest rate will _____, investment and consumption spending will _____, and real GDP will _____.

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

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Definitions:

Side Effects

Unintended reactions or consequences, often negative, occurring in addition to the desired effect of a medication or treatment.

Freud

Sigmund Freud, an Austrian neurologist and the founder of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Personality Development

The ongoing process of developing and maturing one's personality traits and characteristics, influenced by both genetics and environment.

Personality

The combination of characteristics or qualities that form an individual's distinctive character, affecting thoughts, behaviors, and emotions.