All else equal, if the real GDP of an economy increases, then the equilibrium interest rate will _____. In this case, the Federal Reserve can _____ the money supply to bring the interest rate back to its original value.

Question

Quizplus · Accepted Answer

When real GDP increases, demand for money also increases, leading to a higher equilibrium interest rate. The Federal Reserve can increase the money supply to lower the interest rate back to its original level.

All Else Equal, If the Real GDP of an Economy