Question 11 (1 point) A _____ is the most difficult for the Federal Reserve to a

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Question 11 (1 point)

A _____ is the most difficult for the Federal Reserve to address because it causes both inflation and unemployment to rise.

Question 11 options:

a)

b)

c)

d)

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Question 12 (1 point)

If the economy is currently operating below long-run output, what should the Federal Reserve do?

Question 12 options:

a)

b)

c)

d)

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Question 13 (1 point)

Loosening monetary policy causes interest rates to ____, and consumption and investment to ____.

Question 13 options:

a)

b)

c)

d)

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Question 14 (1 point)

A lower interest rate increases consumption, investment, and _____, which _____ aggregate demand.

Question 14 options:

a)

b)

c)

d)

a)

positive demand shock

b)

negative supply shock

c)

negative demand shock

d)

positive supply shock

Explanation / Answer

Answer)

b) Negative supply shock

d)lower interest rates from their current level in an attempt to stimulate the economy and increase the levels of spending.

a)fall; increase

) exports,increases

Lower interest rates lead to higher investment spending. As the economy moves down the AD curve toward full employment in investment spending increases along the AD curve. Lower interest rates result in depreciation of the domestic currency which increases exports as they become more competitive.

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