If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it, ________
A) it would likely conduct a tightening of monetary policy by raising the real interest rate for any given inflation rate
B) it would likely conduct an easing of monetary policy by lowering the real interest rate for any given inflation rate
C) it would likely conduct an easing of monetary policy where the real interest rate would increase due to the ensuing decrease in aggregate demand
D) it would likely conduct a tightening of monetary policy where the real interest rate would increase due to the ensuing increase in aggregate demand
E) none of the above
B
You might also like to view...
Refer to the information above. By accelerator theory, net investment will remain above zero in the long run only so long as
A) expected sales are greater than v* times the capital stock. B) replacement investment is above zero. C) expected sales keep rising. D) expected sales do not fall. E) actual sales fall below expected sales.
In a perfectly competitive resource market, the labor supply curve facing the single firm is
A) vertical. B) horizontal. C) downward sloping. D) upward sloping.
In the above figure, along which range would the demand for this good be most elastic?
A) between point a and point b B) between point c and point d C) between point d and point e D) at point e
When a falloff in usage of a product by some consumers causes others to stop purchasing the item there is
A. a dominant effect. B. a negative-sum game. C. a tit-for-tat feedback. D. negative market feedback.