Question 8Refer to the figure. In the figure, assume the initial real growth rate of the economy is 3% when a positive aggregate demand shock shifts the AD curvefrom AD, to AD5. As a result of the Fed's policy response, the AD curve shifts to AD, in the short run. Which of the following is TRUE about the Fed'spolicy response?InflationLRASrate,SRAS*ADSAD4► AD; AD2 AD;3%Real growthThe Fed responded too little to the shock.The Fed was too fast in responding to the shock.O The Fed provided just the right amount of response to the shock.The Fed responded too much to the shock.

Aggregate demand refers to the overall demand within a market (AD). Aggregate supply refers to the…

Answered: O The Fed responded too little to the…

O The Fed responded too little to the shock The Fed was too fast in responding to the shock O The Fed provided just the right amount of response to the shock The Fed responded too much to the shock.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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