The economy moves up a stationary aggregate demand curve when the Fed:
A. increases its target inflation rate, reflected by a downward shift in the Fed's policy reaction function.
B. increases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.
C. decreases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.
D. decreases its target inflation rate, reflected by an upward shift in the Fed's policy reaction function.
Answer: B
You might also like to view...
The steeper the LM curve
A) the more effective is monetary policy. B) the less effective is monetary policy. C) the greater is the interest-sensitivity of investment. D) the greater is the interest-sensitivity of the money supply.
According to Keynes, the money demand function
a. did not change as the return on other assets changed. b. changes with output. c. shifts with changes in the public confidence in the economy. d. both b and c. e. all of the above.
A summary of a country's economic transactions with foreign residents and governments is called the
A) current account balance. B) capital account balance. C) balance of trade. D) balance of payments.
An advantage of a functional division is that performance is
a. More easily measured b. More difficult to measure c. Not measured d. None of the above