1) When the Federal Reserve ________. A) drains liquidity, the federal funds rat

ID: 1098850 • Letter: 1

Question

1) When the Federal Reserve ________.

A) drains liquidity, the federal funds rate falls

B) drains liquidity, real interest rates fall

C) provides more liquidity, the federal funds rate falls

D) all of the above

E) none of the above

2) If the central bank did not follow the Taylor principle, an increase in inflation would lead to a decrease in ________.

A) the nominal interest

B) the real interest rate

C) aggregate output

D) all of the above

E) none of the above

3) The MP Curve ________.

A) demonstrates how central banks respond to changes in inflation with changes in the interest rate

B) shows how changes in interest rates affect equilibrium output

C) explains short run fluctuations in output and inflation

D) all of the above

E) none of the above

1) When the Federal Reserve ________.

A) drains liquidity, the federal funds rate falls

B) drains liquidity, real interest rates fall

C) provides more liquidity, the federal funds rate falls

D) all of the above

E) none of the above

2) If the central bank did not follow the Taylor principle, an increase in inflation would lead to a decrease in ________.

A) the nominal interest

B) the real interest rate

C) aggregate output

D) all of the above

E) none of the above

3) The MP Curve ________.

A) demonstrates how central banks respond to changes in inflation with changes in the interest rate

B) shows how changes in interest rates affect equilibrium output

C) explains short run fluctuations in output and inflation

D) all of the above

E) none of the above

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.