Question: a. Panel (a) illustrates what happens when the Fed decides to _______ the money supply and _______ interest rates. A) lower; lower B) increase; increase
| a. | Panel (a) illustrates what happens when the Fed decides to _______ the money supply and _______ interest rates. | |
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| A) | lower; lower |
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| B) | increase; increase |
|
| C) | increase; lower |
|
| D) | lower; increase |
| b. | Panel (b) illustrates what happens when the Fed decides to _______ the money supply and _______ interest rates. | |
|
| A) | lower; lower |
|
| B) | increase; increase |
|
| C) | increase; lower |
|
| D) | lower; increase |
| c. | If the economy is experiencing a recessionary gap, the Fed would _______ government bonds, which would _______ the money supply and _______ interest rates. This is shown in Panel _______. | |
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| A) | sell; decrease; increase; (b) |
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| B) | buy; decrease; decrease; (a) |
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| C) | buy; increase; decrease; (a) |
|
| D) | sell; increase; decrease; (a) |
| d. | If the economy is experiencing an inflationary gap, the Fed would _______ government bonds, which would _______ the money supply and _______ interest rates. This is shown in Panel _______. | |
|
| A) | buy; increase; decrease; (a) |
|
| B) | sell; decrease; increase; (b) |
|
| C) | buy; decrease; increase; (b) |
|
| D) | sell; increase; increase; (b) |
Panel (a) Panel (b) SRAS Price level Price level SRAS PA P2 P2 AD P1 AD2 AD ADI Y2 Real GDP (per year) Y, Y Y Real GDP (per year)
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