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Suppose That the Federal Reserve Announces a 50 Basis Point

Question 37

Multiple Choice

Suppose that the Federal Reserve announces a 50 basis point decrease in the target for the federal funds rate that was completely anticipated.According to the new classical model and with everything else held constant,this action by the Federal Reserve will cause real GDP to ________.


A) increase
B) decrease
C) remain constant
D) either increase,decrease or remain constant

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