In the medium run of a few months or a few years, exchange rate markets are influenced by ________________ rates.

A fall in the discount rate will usually encourage banks to borrow from the Fed and therefore reduce the money supply

a. True b. False Indicate whether the statement is true or false

If there is currently an inflationary gap: a. The price level will tend to rise. b. Real output will tend to rise

c. Both a. and b. will occur. d. None of the above will occur.