If a Point Lies on the Monetary Policy Reaction Curve

question 59

Multiple Choice

If a point lies on the monetary policy reaction curve, and at this point the inflation rate equals the target rate of inflation, we know that:

• A) the real interest rate corresponding to this point is above the long-run real interest rate.
• B) the real interest rate corresponding to this point is equal to the long-run real interest rate.
• C) the real interest rate corresponding to this point is below the long-run real interest rate.
• D) current output is above potential output.

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Definitions:

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