In the Short Run, When the Fed Increases the Federal

question 43

Multiple Choice

In the short run, when the Fed increases the federal funds rate

• A) there is no effect on investment because investment depends on the real interest rate.
• B) the real interest rate falls and investment increases.
• C) the real interest rate rises and investment decreases.
• D) the real interest rate is unaffected but investment still decreases.
• E) the real interest rate rises and investment does not change.

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Definitions:

Northern Division

Typically refers to a geographical or organizational segment of a business located in the northern part of a country or region.

Transfer Price

The price charged for goods or services transferred between departments or divisions of the same company.

Variable Cost

Costs that vary directly with the level of production or sales volume, increasing as business activity rises and decreasing as it falls.

Transfer Price

The price at which goods or services are sold between divisions within the same company.