As firms expect future profits to increase, they increase their investment. As a result, real GDP rises above potential GDP. If the Fed followed Friedman's k-percent rule, the Fed would
A) continue allowing the quantity of money to grow at "k" percent.
B) increase the quantity of money more than usual.
C) decrease the quantity of money.
D) raise the federal funds rate.
E) lower the federal funds rate.
A
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An increase in the amount of physical capital will cause
A) an increase in both aggregate demand and real GDP, but have no effect on the price level. B) an increase in both aggregate supply and real GDP, but have no effect on the price level. C) aggregate demand and aggregate supply to increase by the same amounts, causing real GDP to increase and the price level to remain constant. D) an increase in both aggregate supply and real GDP and a reduction in the price level.
Figure 7-7
In Figure 7-7 at 100 units, FC equals
a.
1,000.
b.
1,800.
c.
800.
d.
80.