Suppose the Central Bank Pursues Contractionary Monetary Policy

question 53

Multiple Choice

Suppose the central bank pursues contractionary monetary policy. Such an action will cause:

• A) the natural real interest rate to rise.
• B) the natural real interest rate to fall.
• C) ambiguous effects on the natural real interest rate.
• D) no effect on the natural real interest rate.
• E) the natural real interest rate rises when the nominal rate rises.

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