If the central bank is facing the zero bound constraint and announces a higher inflation target,
A) the real interest rate will increase, which will decrease aggregate expenditure.
B) the real interest rate will decrease, which will increase aggregate expenditure.
C) the nominal interest rate will increase, which will decrease aggregate expenditure.
D) the nominal interest rate will decrease, which will increase aggregate expenditure.
B
Economics
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This Application examines the concept of
A) sticky prices. B) consumer spending habits. C) stagflation. D) the wealth effect.
Economics
If the Fed decides to keep interest rates low when there is a large budget deficit, economists conclude that the Fed is
A. monetizing the debt. B. neutralizing the effects of the deficit. C. correcting the deficit for inflation. D. resisting the effects of the deficit.
Economics