Question
Suppose that the unemployment rate is initially at the natural rate of unemployment. The fiscal authorities then increase taxes while the monetary authorities respond immediately
Suppose that the unemployment rate is initially at the natural rate of unemployment. The fiscal authorities then increase taxes while the monetary authorities respond immediately with an autonomous policy to completely offset the effects on economic activity of the change in fiscal policy. The short-run effect of these two policy actions is to:
-increase inflation
-increase the real policy interest rate
-decrease the real policy interest rate
-decrease inflation
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Portfolio Management In Practice Volume 1
Authors: CFA Institute
1 Edition
1119743699, 978-1119743699
