Use the Following to Answer Questions

question 2

Multiple Choice

Use the following to answer questions
Figure: Monetary Policy
-(Figure: Monetary Policy) Refer to the figure.Assume that the economy is initially at point Y in the graph.If the Fed takes the appropriate action with monetary policy,but banks are slow to lend,then:

• A) the Fed action would be magnified and the economy would move to point X.
• B) the Fed action would be nullified and the economy would remain at point Y.
• C) the Fed action would be partially effective and the economy would move to point Z.
• D) the LRAS curve would shift to the left.

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Definitions:

Priority Claims

Debts that are given special status and are paid before other debts in a bankruptcy proceeding.

Subordination Agreements

Legal documents that alter the priority of financial claims, making one party's claim rank behind another's in the event of a bankruptcy or liquidation.

Pro Rata

A Latin term that means "in proportion," often used to describe a method of allocating amounts or shares among participants according to their entitlement or contribution.

Chapter 11

A provision under the U.S. Bankruptcy Code that allows businesses to reorganize and restructure their debts while continuing operations.