If the Fed Has a Goal of Stable Real GDP

question 108

Multiple Choice

If the Fed has a goal of stable real GDP and the government announces a tax cut,which of the following would occur?

• A) Money demand would not change,real GDP would not change,the interest rate would decrease,and there would be partial crowding out.
• B) Money demand would not change,real GDP would not change,the interest rate would increase,and there would be complete crowding out.
• C) Money demand would increase,real GDP would not change,the interest rate would increase,and there would be partial crowding out.
• D) Money demand would not change,real GDP would increase,the interest rate would decrease,and there would be complete crowding out.
• E) Money demand would increase,real GDP would not change,the interest rate would decrease,and there would be complete crowding out.