If the Fed Responds to an Initial Increase in Aggregate

question 431

Multiple Choice

If the Fed responds to an initial increase in aggregate demand by increasing the quantity of money,

• A) there is the risk of continued inflation.
• B) there will be no inflationary gap.
• C) money wages will fall to reduce the unemployment.
• D) real GDP will begin to decrease more rapidly than if the quantity of money had remained constant.

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