Starting from Long-Run Equilibrium, If a Drought Pushes Up Food

question 30

Multiple Choice

Starting from long-run equilibrium, if a drought pushes up food prices throughout the economy, the Fed could move the economy more rapidly back to full employment output by:

• A) increasing the money supply, but at the cost of permanently higher prices.
• B) decreasing the money supply, but at the cost of permanently lower prices.
• C) increasing the money supply, which would restore the original price level.
• D) decreasing the money supply, which would restore the original price level.

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Definitions:

Disqualified Income

Types of income that cannot be considered or used for certain applications or benefits, as defined by specific rules or guidelines.

Dividends

Payments made by a corporation to its shareholder members, representing a portion of the corporate profits.

American Opportunity Tax Credit

A credit for qualified education expenses paid for an eligible student for the first four years of higher education, with the potential to receive a partial refund if the credit is more than the taxpayer owes.

Lifetime Learning Credit

A tax credit available in the United States for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution, aiming to promote post-secondary education.