The Federal Reserve econometric model estimates that a 1 percent increase in the money supply will
A) increase real GDP by 1 percent after 3 years.
B) increase real GDP by 2 percent in 3 years.
C) increase real GDP by 3 percent 3 years.
D) have no effect on real GDP after 2 years.

Question

Quizplus · Accepted Answer

The Federal Reserve's econometric model suggests that changes in the money supply have a delayed effect on the economy. Specifically, a 1 percent increase in the money supply is estimated to increase real GDP by 1 percent after a period of 3 years, reflecting the time it takes for monetary policy actions to filter through the economy and affect real output.

The Federal Reserve Econometric Model Estimates That a 1 Percent