Question
The Fed increased the supply of US dollars at an average rate of 6 percent per year over the 1980-2005 period. Based on the theory
The Fed increased the supply of US dollars at an average rate of 6 percent per year over the 1980-2005 period. Based on the theory of production capacity, if the Fed had instead increased the money supply at the rate of 7 percent per year during that period, given other policies: (Select all that supply.)
a. The price level in 2005 would have been about 28 percent higher than what it actually reached in that year.
b. The average inflation rate during 1980-2005 would have been one percentage point higher than it actually was in that period.
c. The economy would have enjoyed a much higher level of output in the mid-2000s.
d. The output of the economy in the mid-2000s would not have been very different from the levels it actually reached.
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