Suppose the Economy Has a Recessionary Gap

question 86

Multiple Choice

Suppose the economy has a recessionary gap. By using an expansionary monetary policy, the Fed can

• A) raise real GDP without increasing the price level.
• B) raise real GDP and the price level.
• C) raise real GDP and decrease the price level.
• D) raise the price level alone, but cannot increase real GDP.

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Definitions:

Bone Marrow

The soft, cellular tissue that fills the internal spaces of bones; red bone marrow in certain bones produces blood cells.

Diaphysis

The central shaft of a long bone, distinguished from the bone's broader ends or epiphyses.

Insulates

To prevent the transfer of heat, electricity, or sound into or out of something, often by covering with a material that reduces or blocks the transmission.

Temperature Extremes

Conditions where the environmental temperature is significantly higher or lower than the species' optimal range for survival.