If the economy is at potential GDP and the Fed increases the quantity of money, then
A. potential GDP rises.
B. real GDP rises temporarily above potential GDP.
C. real GDP rises permanently above potential GDP.
D. potential GDP and real GDP both decrease.
Answer:B
If the economy is at potential GDP and the Fed increases the quantity of money, then
A. potential GDP rises. B. real GDP rises temporarily above potential GDP. C. real GDP rises permanently above potential GDP. D. potential GDP and real GDP both decrease.