During the Christmas shopping season, the demand for money increases significantly. To offset the increase in money demand, the Fed must ________ the money supply, which will put ________ pressure on nominal interest rates.
A. decrease; upward
B. decrease; downward
C. increase; downward
D. increase; upward
Answer: C
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Given a downward-sloping aggregate demand curve, if short-run aggregate supply increases, real GDP must increase and nominal GDP must fall.
a. true b. false
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