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Answer6 - 1.The aggregate demand curve shows the...

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1.The aggregate demand curve shows the relationship between inflation and: A) the nominal interest rate. D) the exchange rate. B) the real interest rate. E) short-run equilibrium output. C) the unemployment rate. Answer: E Learning Objective: Aggregate demand curve Level of Learning: Knowledge Type: Word Problem Source: Unique 2.Any value of the money supply chosen by the Federal Reserve implies a specific value for ______. 3.All else equal, an increase in the rate of inflation ____ planned spending and ____ short-run equilibrium output. 4.Because the Fed determines the money supply, the: 5.If the Fed wishes to reduce nominal interest rates, it must engage in an open market ____ of bonds that ____ the money supply. A) sale; increases D) purchase; increases B) sale; decreases E) purchase; decreases C) sale; does not change Answer: D Learning Objective: Fed controls interest rates Level of Learning: Comprehension Type: Word Problem Source: Unique 6.If the Fed wishes to increase nominal interest rates, it must engage in an open market ____ of bonds that ____ the money supply. 7.When the Fed engages in an open market purchase, the money supply ____ and the nominal interest rate ______.
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