The aggregate demand curve shifts to the right when the Fed:
A. increases its target inflation rate, reflected by a downward shift in the Fed's policy reaction function.
B. decreases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.
C. decreases its target inflation rate, reflected by an upward shift in the Fed's policy reaction function.
D. increases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.
Answer: A
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In economics, the term "scarcity" refers to the fact that
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The adage, "There is no such thing as a free lunch," is used to illustrate the principle that
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One concern of those who oppose the central bank targeting inflation at zero is that reducing inflation is costly. What is the cost of reducing the inflation rate?