1) Suppose that inflation is currently 7% and inflationary expectations are also 7%. Assume that intermediate goods prices are not contributing to increased costs. If the Fed wishes to reduce inflation, it must set interest rates to A. raise investment B. create an expansionary output gap C. make actual output equal to potential output D. create a recessionary output gap E. raise consumption

1) Suppose that inflation is currently 7% and inflationary expectations are also 7%. Assume that intermediate goods prices are not contributing to increased costs. If the Fed wishes to reduce inflation, it must set interest rates to A. raise investment B. create an expansionary output gap C. make actual output equal to potential output D. create a recessionary output gap E. raise consumption

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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