According to the Theory of Rational Expectations, If the Fed

question 15

Multiple Choice

According to the theory of rational expectations, if the Fed uses open market operations in order to increase the supply of loanable funds, the ultimate effect on interest rates is definitely

• A)a reduction in interest rates.
• B)an increase in interest rates.
• C)no effect on the interest rates.
• D)the impact on interest rates cannot be determined.

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