With the Economy in Long-Run Equilibrium, If the Fed Moves

question 75

Multiple Choice

With the economy in long-run equilibrium, if the Fed moves unexpectedly to raise aggregate demand by increasing the reserves of depository institutions through substantial open market purchases, what happens in the short-run?

• A)Interest rates will fall.
• B)Inventories will decline unexpectedly.
• C)There will be upward pressure on output prices.
• D)All of the above are correct.

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