When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand
B. increase; raise; decline
C. decline; lower; decline
D. decline; raise; decline
Answer: B
Economics
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In the above figure, the firm will produce
A) 0 units. B) 5 units. C) 15 units. D) 20 units.
Economics
Suppose the domestic and foreign interest rates are both initially equal to 3%. Now suppose the domestic interest rate rises to 5%. Explain what effect this will have on the exchange rate. Also explain what must occur for the interest parity condition to be restored
What will be an ideal response?
Economics