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Suppose There Was a Large Increase in Net Exports

Question 12

Multiple Choice

Suppose there was a large increase in net exports. If the Fed wanted to stabilize output, it could


A) increase the money supply, which will reduce interest rates.
B) decrease the money supply, which will reduce interest rates.
C) increase the money supply, which will increase interest rates.
D) decrease the money supply, which will increase interest rates.

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