What Happens to GDP If the Fed Is Too Responsive

question 72

Multiple Choice

What happens to GDP if the Fed is too responsive to changes in aggregate demand?

• A) Volatility increases.
• B) Volatility decreases.
• C) GDP is difficult to influence in the short-run and the long-run.
• D) It ends up being lower in all cases.

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Definitions:

Payroll Expense

The total amount spent by a business to compensate its employees, including wages, salaries, and bonuses.

Gross Pay

The total amount earned by an employee before any deductions, such as taxes and social security, are applied.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.

Hourly Wage Rate

The amount of money paid to an employee for every hour worked, typically applied to part-time or contract workers.