Assume the Fed Implements Restrictive Monetary Policy

question 35

Multiple Choice

Assume the Fed implements restrictive monetary policy.Which of the following is the most likely result in an AD-AS framework with an upward sloping AS-curve?

• A)the interest rate will increase but output, prices, and real money balances will fall
• B) the interest rate, output, and prices will all decline
• C)prices and output will fall, but real money balances will increase
• D)real money balances will remain unchanged, since money supply and prices will decrease proportionally
• E)real money balances and prices will fall proportionally

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Definitions:

Predictors

Variables used in regression analysis to forecast the value of an outcome variable.

Independent Variable

An independent variable is a variable that is manipulated or changed in an experiment to test its effect on a dependent variable.

Dependent Variable

The outcome factor in a study that changes in response to manipulations of the independent variable.

Predicted Score

An estimate based on a model or algorithm of what a variable's value will be based on other variables.