An Autonomous Monetary Policy Easing Reduces Real Interest Rates and Raises

question 1

Multiple Choice

An autonomous monetary policy easing reduces real interest rates and raises aggregate output ________ and the inflation rate rises ________.

• A)temporarily;permanently
• B)permanently;temporarily
• C)permanently;permanently
• D)temporarily;temporarily

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Definitions:

Comparative Advantage

The ability of a country to produce a good or service at a lower opportunity cost than its trading partners.

Fewer Resources

The state of having limited amounts of inputs required to produce goods and services, such as capital, labor, and materials.

Exchange Rates

The worth of a currency when converted into another, establishing the quantity of one currency that can be swapped for another.

Gains from Trade

The net benefits that parties obtain by voluntarily exchanging goods or services in markets.