In the Short Run, When the Fed Raises the Federal

Multiple Choice

In the short run, when the Fed raises the federal funds rate,

A) the real interest rate is unchanged so investment and consumption expenditure are not changed.
B) the real interest rate temporarily increases, thereby decreasing investment and consumption expenditure.
C) the real interest rate temporarily falls, thereby increasing investment and consumption expenditure.
D) investment and consumption expenditure increase, thereby raising the real interest rate temporarily.
E) the real interest rate temporarily increases, thereby decreasing investment and increasing consumption expenditure.