If f increases, then the Fed can keep output constant by reducing the real interest rate by

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"If f̅ increases, then the Fed can keep output constant by reducing the real interest rate by the same amount as the increase in financial frictions." Is this statement true, false, or uncertain? Explain your answer.

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The Economics of Money Banking and Financial Markets

ISBN: 978-0133836790

11th edition

Authors: Frederic S. Mishkin

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Question Posted: Nov 03, 2017 04:06 AM

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If f increases, then the Fed can keep output constant by reducing the real interest rate by

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False If the Fed changes interest rates by exactly the amount of the change in f this w...View the full answer

The Economics of Money Banking and Financial Markets

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