In the Short Run, When the Fed Increases the Federal

Multiple Choice

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

A) there is no effect on investment because investment depends on the real interest rate.
B) the real interest rate falls and investment increases.
C) the real interest rate rises and investment decreases.
D) the real interest rate is unaffected but investment still decreases.
E) the real interest rate rises and investment does not change.