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content area top Part 1 Bernanke warns against meddling with Fed Testifying on Capitol Hill, Fed chairman Bernanke warned that if Congress limits the Fed's
content area top Part 1 Bernanke warns against meddling with Fed Testifying on Capitol Hill, Fed chairman Bernanke warned that if Congress limits the Fed's independence, financial markets will send interest rates higher. Source: The Independent, July 22, 2009 How might limiting the Fed's independence make interest rates rise? Question content area bottom Part 1 Limiting the Fed's independence could result in _______. A. a Congressional bias toward greater government debt, which increases the demand for loanable funds and raises the real interest rate B. a Congressional bias toward persistently increasing money growth to increase real GDP growth, resulting in higher inflation and higher interest rates in the long run C. greater business investment, which increases the demand for loanable funds and raises the real interest rate D. a decrease in personal saving, which decreases the supply of loanable funds and raises the real interest rate
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