Use the Following to Answer Questions 50-54

question 14

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.As a result of the Fed's policy response,the AD curve shifts to AD₃ in the short run.Which of the following is TRUE about the Fed's policy response?

• A) The Fed responded too little to the shock.
• B) The Fed responded too much to the shock.
• C) The Fed provided just the right amount of response to the shock.
• D) The Fed was too fast in responding to the shock.

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Definitions:

Divided Congress

A situation in which one party controls the U.S. House of Representatives and another party controls the U.S. Senate.

Conference Committees

are temporary committees formed to reconcile differences between the House and Senate versions of a bill before it is sent to the president for approval.

Legislation Compromise

Legislation compromise refers to the process of finding a middle ground in legislative negotiations, where conflicting parties come to a mutual agreement to pass a bill.

Logrolling

A practice in legislative bodies where members agree to support each other's proposals or bills for mutual benefit, despite their individual preferences.