Homework answers / question archive /  When the Federal Reserve increases the growth rate of the money supply, the income effect causes the interest rate to interest rate Continuing on the same train of thought, when the Fed decreases the growth rate of the money supply, the price level effect drives the interest rate while the expected inflation rate pushes the interest rate Suppose there is an increase in the growth rate of the money supply

 When the Federal Reserve increases the growth rate of the money supply, the income effect causes the interest rate to interest rate Continuing on the same train of thought, when the Fed decreases the growth rate of the money supply, the price level effect drives the interest rate while the expected inflation rate pushes the interest rate Suppose there is an increase in the growth rate of the money supply

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 When the Federal Reserve increases the growth rate of the money supply, the income effect causes the interest rate to interest rate Continuing on the same train of thought, when the Fed decreases the growth rate of the money supply, the price level effect drives the interest rate while the expected inflation rate pushes the interest rate Suppose there is an increase in the growth rate of the money supply. If the liquidity effect is smaller than the income, price-level, and expected inflation effects, and if inflationary expectations adjust slowly, then in the short run, interest rates O A. become unpredictable. B. remain unchanged O C. fall OD. rise