When Output Is Below Potential and the Policy Rate Has

question 10

Multiple Choice

When output is below potential and the policy rate has hit the floor of zero,the resulting fall in inflation leads to ________ real interest rates,which ________ output further,which causes inflation to fall further.

• A)lower;increase
• B)higher;depress
• C)higher;increase
• D)lower;depress

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Definitions:

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