Using the Liquidity-Preference Model, When the Federal Reserve Decreases the Money

question 152

Multiple Choice

Using the liquidity-preference model, when the Federal Reserve decreases the money supply,

• A)the equilibrium interest rate increases.
• B)the aggregate-demand curve shifts to the right.
• C)the quantity of goods and services demanded is unchanged for a given price level.
• D)the short-run aggregate-supply curve shifts to the left.

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Definitions:

Volumetric Efficiency

The ratio of air drawn into a cylinder compared to the maximum air that could enter the cylinder. Most gas engines are about 80 to 90 percent volumetrically efficient.

Air Drawn

The process of pulling air into a system, such as an engine or ventilation system, from the surroundings.

Cylinder

A fundamental part of an engine's block that houses the pistons, where fuel combustion occurs to generate power.

Drive-By-Wire Throttle

An electronic throttle control system that uses electronic signals to control the throttle opening instead of mechanical linkage.