In the figure above, in the long run what happens if the Fed increases the quantity of money by 5 percent?
A) The value of money rises by 5 percent.
B) The nominal interest rate rises by 5 percent.
C) The price level rises by 5 percent and the LRMD shifts leftward.
D) The value of money falls by 5 percent and there will be a movement down along the LRMD curve.
E) The real interest rate falls and the LRMD curve shifts rightward.
D
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The Fed prefers to change its interest rate target only rarely because
a. those targets affect productivity in the labor force b. a fluctuating stock and bond market signals a recession c. interest rates are greatly overrated as a measure of economic performance d. it is so difficult to do so e. the changes destabilize the financial markets
Use a pizza pie analogy to discuss the trade off between income equality and economic efficiency
What will be an ideal response?