Exhibit 16.4 -Refer to Exhibit 16.4. If the Fed Follows the Announced

Multiple Choice

Exhibit 16.4

-Refer to Exhibit 16.4. If the Fed follows the announced stable-price policy of keeping prices at P' and keeping the economy at its potential, the Fed must stimulate aggregate demand as much as workers and firms expect (shown by point_____) , but this is _____.

A) c, inflationary
B) d, inflationary
C) e, inflationary
D) c, deflationary
E) d, deflationary