The Aggregate Demand Curve Shifts to the Left When the Fed

question 95

Multiple Choice

The aggregate demand curve shifts to the left when the Fed:

• A)increases its target inflation rate, reflected by a downward shift in the Fed's policy reaction function.
• B)decreases its target inflation rate, reflected by an upward shift in the Fed's policy reaction function.
• C)increases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.
• D)decreases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.

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