The actual rate of unemployment will generally
a. increase as an economy enters a recession.
b. decrease as an economy enters a recession.
c. fall below the natural rate of unemployment during a recession.
d. do both a and c.
A
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Which of the following correctly describes what the Fed used as monetary targets in the past?
A) The Fed used M1 and M2 as targets after 1993. B) After 1980 and before the 1990s, the Fed focused on interest rate targets. C) The Fed focused on M1 as a target after deregulation of the financial markets. D) The Fed increased its reliance on interest rate targets since the mid-1990s.
If actual real GDP is greater than the equilibrium level of real GDP (i.e., the aggregate expenditures function is below the 45-degree line), what happens to restore equilibrium to the economy?