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 2018 and in 2019 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 2019,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 2018 and in 2019 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 2019,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 2019, real GDP will be higher than if the Fed had taken no action. However, this may lead to an increase in the inflation rate. Therefore, the correct answer is B, as real GDP and the inflation rate will be higher than if the Fed had taken no action.

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