If there are no changes in inflation expectations, a fall in the federal funds rate:
A) increases both the long-run nominal interest rate and the long-run expected interest rate.
B) decreases the long-run nominal interest rate and increases the long-run expected interest rate.
C) decreases both the long-run nominal interest rate and the long-run expected interest rate.
D) increases the long-run nominal interest rate and decreases the long-run expected interest rate.
C
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One of the problems with a strict monetary policy rule that sets a constant growth rate for the money supply is that when there are large shocks to the economy, the growth rate of _______, causing real GDP growth to slow down.
A. the average price level can fall B. the average price level can rise C. the velocity of money can fall D. the velocity of money can rise
Suppose a consumer only purchases food and clothing, and food is plotted along the horizontal axis of the consumer's indifference map. If the price of food and clothing increase and income does not change, then the budget line changes by rotating:
A) counter-clockwise about the fixed vertical axis intercept. B) clockwise about the fixed vertical axis intercept. C) counter-clockwise about the fixed horizontal axis intercept. D) clockwise about the fixed horizontal axis intercept. E) none of the above