The Fed's policy actions of reacting to higher inflation by raising the real interest rate during 2004-2006 were
A)upward movements along the monetary policy curve.
B)downward movement along the monetary policy curve.
C)upward shifts of the monetary policy curve.
D)downward shifts of the monetary policy curve.

Question

Quizplus · Accepted Answer

When the Fed raised the real interest rate in response to higher inflation during 2004-2006, it resulted in upward movements along the monetary policy curve. This is because the Fed's actions were based on the same monetary policy curve, but with different real interest rates.

The Fed's Policy Actions of Reacting to Higher Inflation by Raising