1. Assume Aggregate Demand (AD) is fixed. If fiscal policy promotes an increase in Aggregate Supply (AS), what happens to GDP and price levels?
A. GDP increases and price level increases
B. GDP decreases and price level decreases
C. GDP increases and price level decreases
D. GDP decreases and price level increases.
2. If the Federal Reserve wants to decrease the money supply, it should:
A. conduct open market purchases.
B. decrease the discount rate.
C. decrease interest rates.
D. conduct open market sales.