An Unanticipated Shift to a More Restrictive Monetary Policy by the Fed

question 45

Multiple Choice

An unanticipated shift to a more restrictive monetary policy by the Fed will

• A) increase real interest rates and, thereby, reduce investment, current consumption, and aggregate demand.
• B) reduce real interest rates, leading to a depreciation of the dollar and an expansion in net exports and aggregate demand.
• C) increase real interest rates, leading to higher asset prices that will stimulate aggregate demand.
• D) reduce real interest rates and, thereby, stimulate investment, current consumption, and aggregate demand.

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Definitions:

Defame

To damage someone's reputation through false or unjustified statements.

Preexisting Obligation

An obligation that already exists before a certain action is taken or an agreement is made, often relevant in contract law.

Under Seal

denotes a formal legal process or document that has been officially sealed, indicating confidentiality or authenticity.

Substituting a New Contract

Replacing an existing contract with a new one, which extinguishes the obligations under the original contract.