Question

Suppose that the stock market experiences a significant and prolonged decline. In response, the Federal Reserve lowers the federal funds interest rate. Not long afterward the interest rate decline, there is a large positive shock to investment spending. As a result of both the monetary policy action and the investment spending shock:

O actual output may go above potential outputO inflation will increase more than the FOMC had intendedO the unemployment rate will be below the natural rateO all of the above

Answer 1

a decrease in the interest rate and a positive increase in the demand will increase the demand that will increase the actual output that will go beyond the potential output and increase the inflation and decrease the unemployment rate.

Step-by-step explanation:

a decrease in the interest rate and a positive increase in the demand will increase the demand that will increase the actual output that will go beyond the potential output and increase the inflation and decrease the unemployment rate.