For a fixed target real interest rate and target inflation rate, when inflation increases, the Fed ________ interest rates, hence ________ short-run equilibrium output.
A. decreases; decreasing
B. increases; increasing
C. increases; decreasing
D. decreases; increasing
Answer: C
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a. True b. False
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a. increase the price of imported autos b. increase the price of domestic autos c. decrease the quantity of foreign autos purchased by U.S. consumers d. decrease the quantity of domestic autos purchased by U.S. consumers
Contrast the effects to the euro and the U.S. dollar of a reduction in European tariffs on U.S. imports, ceteris paribus.
What will be an ideal response?