When Fed Policy Is Being Used to Offset a Contractionary

question 7

Multiple Choice

When Fed policy is being used to offset a contractionary gap, which of the following variables decreases as a result?

• A)​Aggregate demand.
• B)​Investment.
• C)​Net Exports.
• D)​None of the above variables decreases as a result of Fed policy to offset a contractionary gap..

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Definitions:

Bond Prices

The market price at which a bond is traded, which inversely varies with interest rates and the bond's perceived risk.

Federal Reserve

is the central banking system of the United States, responsible for setting monetary policy, regulating banks, maintaining financial stability, and providing banking services to governmental institutions.

Response

Reaction or answer to a question, situation, stimulation, or environmental change, often analyzed in contexts such as surveys, experiments, or market changes.

Federal Reserve

America's leading banking institution in charge of regulating monetary policy.