If the public has correct rational expectations and the Fed increases both reserve requirements and the discount rate, it would be expected to result in:
A)a higher level of real output and a lower price level.
B)a lower price level but no change in real output.
C)a higher price level and a reduced level of real output.
D)a higher price level but no change in real output.

Question

If the public has correct rational expectations and the Fed increases both reserve requirements and the discount rate, it would be expected to result in:
A)​a higher level of real output and a lower price level.
B)​a lower price level but no change in real output.
C)​a higher price level and a reduced level of real output.
D)​a higher price level but no change in real output.

Quizplus · Accepted Answer

The Answer of If the public has correct rational expectations and the Fed increases both reserve requirements and the discount rate, it would be expected to result in:
A)​a higher level of real output and a lower price level.
B)​a lower price level but no change in real output.
C)​a higher price level and a reduced level of real output.
D)​a higher price level but no change in real output.

If the Public Has Correct Rational Expectations and the Fed