Suppose Real and Potential GDP Are Initially Equal

question 48

Multiple Choice

Suppose real and potential GDP are initially equal. If the Fed increases the target inflation rate, then in the short run we would expect

• A)a decrease in the rate of inflation.
• B)an increase in the rate of inflation.
• C)a higher real rate of interest.
• D)lower unemployment.
• E)a higher nominal interest rate.

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