Assume that money demand is a function of real interest rate and income. When the central bank announces that it will sell government bonds one year from now, which of the following events is/are likely to happen in the current year? (i) Lower price level (ii) Lower nominal interest rate (iii) Lower demand for real money balances Oa. Only (ii) and (iii). O b. O c. O d. Only (i) and (ii). (i), (ii), and (iii) are all going to happen in the current year. Only (iii).

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Assume that money demand is a function of real interest rate and income. When the central bank
announces that it will sell government bonds one year from now, which of the following events is/are
likely to happen in the current year?
(i) Lower price level
(ii) Lower nominal interest rate
(iii) Lower demand for real money balances
O a. Only (ii) and (iii).
O b.
O c.
O d.
Only (i) and (ii).
(i), (ii), and (iii) are all going to happen in the current year.
Only (iii).
Transcribed Image Text:Assume that money demand is a function of real interest rate and income. When the central bank announces that it will sell government bonds one year from now, which of the following events is/are likely to happen in the current year? (i) Lower price level (ii) Lower nominal interest rate (iii) Lower demand for real money balances O a. Only (ii) and (iii). O b. O c. O d. Only (i) and (ii). (i), (ii), and (iii) are all going to happen in the current year. Only (iii).
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