From an initial long run macroeconomic equilibrium if the Federal Reserve

From an initial long run macroeconomic equilibrium if

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156) From an initial long-run macroeconomic equilibrium, if the Federal Reserve anticipated that nextyear aggregate demand would grow significantly faster than long-run aggregate supply, thenthe Federal Reserve would most likely A) increase interest rates.B) decrease interest rates.C) decrease income tax rates.D) increase income tax rates.Answer: A 156) Page Ref: 914 - 915/532 - 533 Learning Outcome: Macro - 12: Explain how monetary policy influences interest rates, aggregate demand, real GDP and inflation. 157) Contractionary monetary policy to prevent real GDP from rising above potential real GDP wouldcause the inflation rate to be ________ and real GDP to be ________. Page Ref: 914 - 915/532 - 533 Learning Outcome: Macro - 12: Explain how monetary policy influences interest rates, aggregate demand, real GDP and inflation. 47
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Table 15-1YearPotential Real GDPReal GDPPrice Level2016$18.2 trillion$18.2 trillion145201718.6 trillion18.5 trillion147158)Refer to Table 15-1.The hypothetical information in the table shows what the values for realGDP and the price level will be in 2017 if the Fed does not use monetary policy. Which of thefollowing policies makes sense if the Fed wants to keep real GDP at its potential level in 2017? 158) Page Ref: 915 - 917/533 - 535 Learning Outcome: Macro - 12: Explain how monetary policy influences interest rates, aggregate demand, real GDP and inflation. 48
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