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An Increase in Interest Rate by the Federal Reserve Will

Question 31

Multiple Choice

An increase in interest rate by the Federal Reserve will affect only real interest rates because:


A) inflation is sticky in the short run.
B) the relationship between money growth and inflation does not necessarily hold in the short run.
C) prices are flexible in the short and long runs.
D) contracts apply only in the very short run.
E) a and b are correct.

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