Suppose That the Federal Reserve Bank Announces That It Will

question 206

Multiple Choice

Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to increase the money supply.This is likely because

• A) the Federal Reserve Bank is worried about inflation.
• B) the Federal Reserve Bank is worried about unemployment.
• C) the Federal Reserve Bank is hoping to reduce the demand for goods and services.
• D) the Federal Reserve Bank is worried that the economy is growing too quickly.

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Definitions:

Average Fixed Costs (AFC)

The fixed costs of production (not varying with output) divided by the quantity of output produced; typically decreases as production increases.

Total Fixed Costs (TFC)

The sum of all costs that remain constant regardless of the level of production or output in the short run.

Average Fixed Cost

The fixed costs of production divided by the total units of output, which decreases as production increases.

Total Cost

The complete cost of production, combining both fixed and variable costs.