If the Fed shifts to a more restrictive monetary policy in order to help control

ID: 1221654 • Letter: I

Question

If the Fed shifts to a more restrictive monetary policy in order to help control inflation, the policy shift will generally:

stimulate aggregate demand and real output as soon as the policy is instituted.

reduce aggregate demand immediately and quickly bring the inflation under control.

reduce aggregate demand and help bring inflation under control, but the primary effects may not be felt for several months or quarters.

lower real interest rates in the short run, but in the long run, the real interest rates will rise.

stimulate aggregate demand and real output as soon as the policy is instituted.

reduce aggregate demand immediately and quickly bring the inflation under control.

reduce aggregate demand and help bring inflation under control, but the primary effects may not be felt for several months or quarters.

lower real interest rates in the short run, but in the long run, the real interest rates will rise.

Answer :- 3.)

reduce aggregate demand and help bring inflation under control, but the primary effects may not be felt for several months or quarters.

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