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If Prices Are Sticky and There Are No Aggregate Demand

Question 118

Multiple Choice

If prices are sticky and there are no aggregate demand shocks, and if the Fed raises the interest rate, ________ and ________.


A) unemployment falls; potential output falls
B) the real interest rate falls; short-run output falls
C) the unemployment rate rises; short-run output rises
D) the real interest rate rises; short-run output falls
E) the real interest rate falls; current output falls

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