Table 15-2

-Refer to Table 15-2.Consider the hypothetical information in the table above for potential real GDP,real GDP,and the price level in 2016 and in 2017 if the Federal Reserve does not use monetary policy.If the Fed uses monetary policy successfully to keep real GDP at its potential level in 2017,which of the following will be higher than if the Fed had taken no action?
A)real GDP and the unemployment rate
B)real GDP and the inflation rate
C)real GDP and potential GDP
D)potential GDP and the inflation rate

Question

Table 15-2
 
-Refer to Table 15-2.Consider the hypothetical information in the table above for potential real GDP,real GDP,and the price level in 2016 and in 2017 if the Federal Reserve does not use monetary policy.If the Fed uses monetary policy successfully to keep real GDP at its potential level in 2017,which of the following will be higher than if the Fed had taken no action?
A)real GDP and the unemployment rate 
B)real GDP and the inflation rate 
C)real GDP and potential GDP 
D)potential GDP and the inflation rate

Quizplus · Accepted Answer

If the Fed uses monetary policy successfully to keep real GDP at its potential level in 2017, real GDP will be higher than it would have been without Fed intervention. However, this increase in real GDP could cause an increase in the inflation rate. Therefore, the only option that includes both real GDP and the inflation rate as being higher than if the Fed had taken no action is option B.

Table 15-2 -Refer to Table 15-2.Consider the Hypothetical Information in the Table