Suppose that expectations are not adaptive and that increases in the money supply cause the expected inflation
Question:
a. In this case, when the Fed increases the money supply, what happens to long-term real interest rates?
b. How does the link between money supply increases and expected inflation change the Fed’s ability to affect the economy through the interest rate channel?
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Related Book For
Macroeconomics
ISBN: 9780132109994
1st Edition
Authors: Glenn Hubbard, Anthony Patrick O'Brien, Matthew P Rafferty
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