Refer to Figure 11.2. Assume the economy is in equilibrium at 1, where real GDP equals potential GDP, and then the economy experiences a negative demand shock. Other things equal, the negative demand shock is best represented by a(n)
A) movement up along the Phillips curve.
B) movement down along the Phillips curve.
C) upward shift of the Phillips curve.
D) downward shift of the Phillips curve.
Question 2
When the Fed lends to depository institutions, the loans are called
A) federal funds.
B) discount loans.
C) repurchase agreements.
D) reverse repurchase agreements.
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