If the Fed reacts to a series of negative real shocks by raising money growth every time:
A) the inflation rate will increase over time.
B) the inflation rate will decrease over time.
C) deflation will occur.
D) the inflation rate will remain unchanged.

Question

Quizplus · Accepted Answer

Raising money growth in response to negative real shocks would lead to an increase in the money supply, which would eventually lead to an increase in the price level and an increase in inflation.

If the Fed Reacts to a Series of Negative Real