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Suppose the FED credibly commits to keep short-term interest rates low for a long time, say, for 5 years. Holding other factors fixed, Group of

Suppose the FED credibly commits to keep short-term interest rates low for a long time, say, for 5 years. Holding other factors fixed,

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long-term interest rates should not be affected, as they are determined solely by long-run inflation expectations

long-term interest rates should decrease

this an example of contractionary monetary policy

long-term interest rates should increase

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