In the Short Run, Monetary Policy Can

question 70

Multiple Choice

In the short run, monetary policy can

• A) raise the federal funds rate, thereby decreasing the supply of loanable funds, raising the real interest rate, and decreasing investment.
• B) lower the federal funds rate, thereby increasing the supply of loanable funds, and lowering the exchange rate.
• C) raise the federal funds rate and shift the aggregate demand curve leftward.
• D) All of the above answers are correct.

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Definitions:

Income

The financial return or compensation received by an individual or household from various sources like labour, investments, or business ventures.

Budget Constraints

A financial restriction that limits the amount of money that can be spent on different categories of goods and services.

Optimum

The most favorable condition or level for growth, reproduction, or success.

Substitutes

Two goods for which an increase in the price of one leads to an increase in the demand for the other.