What Effect Does Restrictive Monetary Policy Have on Short-Term Real

question 165

Multiple Choice

What effect does restrictive monetary policy have on short-term real interest rates?

• A) Restrictive monetary policy tends to push short-term interest rates upward.
• B) Restrictive monetary policy tends to push short-term interest rates downward.
• C) The effect of restrictive monetary policy on short-term interest rates is unpredictable.
• D) Restrictive monetary policy has no effect on short-term interest rates.

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Definitions:

Medium of Exchange

A mediating tool or mechanism that enables the buying, selling, or exchanging of products among individuals or groups.

Standard of Deferred Payment

A function of money that allows for goods and services to be paid for at a future date.

M1

Refers to a category of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts, and negotiable order of withdrawal (NOW) accounts.

Passbook Savings Account

A type of savings account where transactions are recorded in a physical booklet, allowing depositors to track account activity manually.