Suppose the Fed Pursues a Policy That Leads to Higher

question 71

Multiple Choice

Suppose the Fed pursues a policy that leads to higher interest rates in the United States.How will this policy affect real GDP in the short run if the United States is an open economy? This policy

• A)reduces investment spending,consumption spending and net exports,all of which reduce GDP.
• B)reduces investment spending and consumption spending,both of which reduce GDP.Net exports rise which increases GDP.
• C)reduces investment spending and consumption spending,both of which reduce GDP.Net exports fall which increases GDP.
• D)increases investment spending,consumption spending,and net exports,all of which increase GDP.

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