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In the IS/MP Framework, When the Fed ________ the Federal

Question 101

Multiple Choice

In the IS/MP framework, when the Fed ________ the federal funds rate in the aftermath of the decline in housing prices, the financial friction gave rise to a(n) ________ in the real interest rate, which caused a(n) ________.


A) lowered; increase; deeper recession
B) raised; decline; commodity bubble
C) lowered; decline; expansion
D) held constant; economic "settling"; disinflation
E) lowered; decrease; deeper recession

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