In the short run, a rise in the federal funds rate ________ the price level and ________ real GDP.
A) lowers; decreases
B) lowers; does not change
C) lowers; increases
D) does not change; increases

Question

Quizplus · Accepted Answer

A rise in the federal funds rate typically leads to higher interest rates overall, which can decrease spending and investment. This reduction in demand can lower the price level and decrease real GDP in the short run.

In the Short Run, a Rise in the Federal Funds