If the Economy Is at Potential Output and the Fed

question 158

True/False

If the economy is at potential output and the Fed decreases the money supply, in the short run the likely result will be a decrease in investment and a decrease in consumption.

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Definitions:

North American Potlatch

A ceremonial feast or gathering among indigenous peoples of the Pacific Northwest Coast of Canada and the United States, characterized by the distribution of gifts to affirm or establish status and prestige.

Generalized Reciprocity

A mode of exchange in which the value of the gift is not calculated, nor is the time of repayment specified.

Balanced Reciprocity

A mode of exchange in which the giving and the receiving are specific as to the value of the goods and the time of their delivery.

Market Economy

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, with little government intervention.