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:

Sphenoidal Sinus

Air-filled cavities located within the sphenoid bone, behind the eyes and under the brain, part of the human sinuses.

Frontal Sinus

Air-filled cavities in the skull, located above the eyes within the frontal bone, which lighten the skull and resonate the voice.

Ethmoidal Sinus

Air-filled spaces located within the ethmoid bone between the nose and eyes, part of the paranasal sinuses.

Maxillary Sinus

The maxillary sinus is one of the four pairs of paranasal sinuses that are located within the bones of the face and cheeks, specifically within the maxilla or upper jaw bone.