A Tax Cut Combined with Tight Money, as Was the Case

Multiple Choice

A tax cut combined with tight money, as was the case in the United States in the early 1980s, should lead to a:

A) rise in the real interest rate and a fall in investment.
B) fall in the real interest rate and a rise in investment.
C) rise in both the real interest rate and investment.
D) fall in both the real interest rate and investment.