If the Fed Unexpectedly Shifts to a More Expansionary Monetary

question 171

Multiple Choice

If the Fed unexpectedly shifts to a more expansionary monetary policy, which of the following will most likely occur in the short run?

• A) a decrease in the real interest rate
• B) an increase in unemployment
• C) a decrease in real GDP
• D) an increase in the nominal interest rate

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Definitions:

Coin Toss

A random method used to determine a decision, consisting of throwing a coin into the air and checking which side is facing up when it lands.

Expected Value

A statistical concept that calculates the average outcome of a probability event or investment over the long term.

Expected Value

The anticipated value for an investment or probability-weighted average of all possible values in a given situation.

Probabilities

Probabilities measure the likelihood of a particular event or outcome occurring, expressed as a number between 0 (impossible) and 1 (certain).