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If Fed a Cares Only About Keeping the Price Level

Question 8

Multiple Choice

If Fed A cares only about keeping the price level stable and Fed B cares only about keeping output at its natural level, then in response to an exogenous increase in the price of oil:


A) both Fed A and Fed B should increase the quantity of money.
B) Fed A should increase the quantity of money whereas Fed B should keep it stable.
C) Fed A should keep the quantity of money stable whereas Fed B should increase it.
D) both Fed A and Fed B should keep the quantity of money stable.

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