The Dilemma Facing the Federal Reserve in the Event That

question 63

Multiple Choice

The dilemma facing the Federal Reserve in the event that an unfavorable supply shock moves the economy away from the natural rate of output is that monetary policy can either return output to the natural rate, but with a ______ price level, or allow the price level to return to its original level, but with a ______ level of output in the short run.

• A) higher; higher
• B) higher; lower
• C) lower; lower
• D) lower; higher

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Definitions:

Different Kinds

Refers to a variety or range of types or categories within a group.

Entropy

In thermodynamics, a measure of the disorder or randomness in a system; in information theory, a measure of uncertainty or the information content.

State Meaning

To clearly and explicitly express or define the significance or intention of something.

Analyze Reasons

The process of examining the causes or motives behind an action or event to understand it better.