If the Fed Overreacts to a Negative Spending Shock by Increasing

question 124

Multiple Choice

If the Fed overreacts to a negative spending shock by increasing money growth too much:

• A) both real GDP growth and inflation will decrease more than the Fed prefers.
• B) both real GDP growth and inflation will increase more than the Fed prefers.
• C) real GDP growth will increase more and inflation will increase less than the Fed prefers.
• D) real GDP growth will increase less and inflation will increase more than the Fed prefers.

---

Definitions:

Catalogue

A comprehensive list or inventory, often detailed and organized, of items for sale or collection.

Breach of Contract

An infringement or violation of the terms agreed upon in a contract, resulting in legal liability.

Counter-Offer

A proposal made in response to a previous offer, differing in terms and suggesting a new agreement.

Zoned Duplex

A residential building divided into two units with separate entrances, located in an area designated by zoning laws for such structures.