If the Slope of the Monetary Policy Rule Line Is

question 108

Multiple Choice

If the slope of the monetary policy rule line is 2, then when inflation rises by 1 percent, the

• A)nominal interest rate rises by 2 percent.
• B)nominal interest rate rises by 1 percent.
• C)nominal interest rate rises by 3 percent.
• D)real interest rate rises by 2 percent.
• E)real interest rate rises by 3 percent.

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Definitions:

Federal Reserve

The Federal Reserve is the central banking system of the United States, responsible for monetary policy, financial supervision, and the stability of the financial system.

Deposit

To entrust money to a bank or other institution; money (cash or checks) put into an account, increasing the account balance.

Agent

One that acts or has the power or authority to act for another.

ATM

An automated teller machine, a specialized computer that allows bank customers to perform financial transactions without the need for a human cashier.