Use the Following to Answer Questions 50-54

question 149

Multiple Choice

Use the following to answer questions 50-54:
Figure: Monetary Policy and Demand Shocks
-(Figure: Monetary Policy and Demand Shocks) Refer to the figure.In the figure,assume the initial real growth rate of the economy is 3% when a positive aggregate demand shock shifts the AD curve from AD₁ to AD₄.The correct monetary policy response is to:

• A) reduce money supply growth,so that the AD curve shifts back to AD₁.
• B) reduce money supply growth,so that the AD curve remains at AD₄.
• C) increase money supply growth,so that the AD curve shifts to AD₃.
• D) increase money supply growth,so that the AD curve shifts to AD₅.

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Definitions:

Dividends

Rephrased: Payments made by a corporation to its shareholders, usually as a distribution of profits.

Net Income

The concluding income of a company after removing the costs and taxes from its revenue.

Average Total Assets

The mean value of all the assets a company owns, calculated by adding the beginning and ending total asset balances during a period and dividing by two.

Earnings Activities

Activities that generate income for a business, including operations, sales, and investments.