Suppose individuals expect that interest rates will increase in the future.Also assume that the Fed wants to prevent any change in current output.Given this goal of the Fed,the Fed should implement a policy in the current period that
A)shifts the IS curve rightward.
B)shifts the IS curve leftward.
C)shifts the IS curve leftward and the LM curve upward.
D)shifts the LM curve upward.
E) shifts the LM curve downward.

Question

Quizplus · Accepted Answer

To counteract the expected increase in interest rates and prevent any change in current output, the Fed should aim to lower current interest rates to stimulate investment and consumption. This can be achieved by shifting the LM curve downward, which indicates an increase in the money supply, thus lowering interest rates and offsetting the expected future increase.

Suppose Individuals Expect That Interest Rates Will Increase in the Future.Also