Suppose the Fed Reacts to an Economic Shock and Quickly

question 211

Multiple Choice

Suppose the Fed reacts to an economic shock and quickly restores the economy to its long-run potential growth rate.It is most likely that this shock was:

• A) an aggregate demand shock.
• B) a real shock.
• C) a productivity shock.
• D) a supply shock.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the ownership interest of shareholders.

Income Statement

A financial statement that shows a company's revenues and expenses over a specified period of time, leading to the net profit or loss for that period.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Earnings Decrease

A reduction in the income a company generates from its activities, excluding extraordinary and non-recurring items.