If the Economy Is in a Long-Run Equilibrium When the Federal

question 92

Multiple Choice

If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.

• A)it would likely conduct an easing of monetary policy by raising the real interest rate for any given inflation rate
• B)it would likely conduct a tightening of monetary policy by raising the real interest rate for any given inflation rate
• C)it would likely conduct an easing of monetary policy where the real interest rate would increase due to the ensuing decrease in aggregate demand
• D)it would likely conduct a tightening of monetary policy where the real interest rate would increase due to the ensuing increase in aggregate demand
• E)none of the above

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