Suppose the Nominal Interest Rate Is 4 Percent and the Price

question 218

Multiple Choice

Suppose the nominal interest rate is 4 percent and the price level is 110. If the Fed increases the quantity of money, in the short run

• A) the price level falls below 110.
• B) the nominal interest rate rises above 4 percent.
• C) neither the nominal interest rate nor the price level change.
• D) the nominal interest rate falls below 4 percent.
• E) None of the above answers are correct.

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