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When the Fed Reacts to a Positive Aggregate Demand Shock

Question 70

Multiple Choice

When the Fed reacts to a positive aggregate demand shock, which of the following is likely to make the period of disinflation shorter? I. credibility on the part of the Fed II. higher uncertainty about investment returns III. greater nominal wage flexibility


A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

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