Suppose the Central Bank Engages in Contractionary Monetary Policy That

question 64

Multiple Choice

Suppose the central bank engages in contractionary monetary policy that results in lower money growth. This lower money growth will cause which of the following in the short run?

• A) Lower real interest rates and lower nominal interest rates.
• B) Lower real interest rates and higher nominal interest rates.
• C) Higher real interest rates and higher nominal interest rates.
• D) Higher real interest rates and lower nominal interest rates.
• E) No change in either nominal or real interest rates.

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