Suppose That the Economy Is Producing Above Potential GDP and the Fed

Multiple Choice

Suppose that the economy is producing above potential GDP and the Fed implements the correct change in monetary policy,but not until after the economy has passed the peak of the boom.Then

A) the Fed's contractionary policy may result in too large of a decrease in GDP.
B) the Fed's contractionary policy may result in too small of an increase in GDP.
C) the Fed's expansionary policy may result in too small of a decrease in GDP.
D) the Fed's expansionary policy may result in too large of an increase in GDP.