What is the inflation gap? What is the output gap?
Explain how an increase in real interest rates affects the components of aggregate expenditure.
The MP curve represents A) the Fed's monetary policy actions in setting a target for the federal funds rate. B) the relationship between the money supply and the price level. C) a relationship between the real interest rate and manufacturing production. D) the relationship between real interest rates and potential GDP.
Which interest rate is most relevant in determining aggregate expenditures? A) federal funds rate B) short-term real interest rate C) long-term nominal interest rate D) long-term real interest rate