If the Fed's Monetary Policy Reaction Function Does Not Change

question 124

Multiple Choice

If the Fed's monetary policy reaction function does not change, then when inflation increases the Fed responds by ________ the real interest rate, which ________ consumption and investment spending, which ________ output.

• A)increasing; increases; increases
• B)increasing; increases; decreases
• C)increasing; decreases; decreases
• D)decreasing; decreases; decreases

---

Definitions:

Tax Per Unit

A fixed amount charged as tax on a single unit of a good or service.

Good Citizen

An individual who acts responsibly, ethically, and with social awareness within their community.

Financial Incentives

Financial rewards provided to influence the behavior or decisions of individuals or organizations.

Shooting Deaths

Fatalities resulting from firearms, often highlighted in discussions on gun control and public safety.