In order to lower the federal funds rate, the Fed ________ government securities in open market operations, so that banks' reserves ________ and the quantity of money ________.
A) buys; increase; increases
B) sells; increase; decreases
C) buys; decrease; increases
D) buys; decrease; decreases
E) sells; decrease; decreases
Question 2
The short-run Phillips curve shows only a short-run tradeoff between the unemployment rate and the inflation rate because in the long run the
A) expected inflation rate increases.
B) unemployment rate returns to the natural unemployment rate and so there is no long-run tradeoff between the inflation rate and the unemployment rate.
C) natural unemployment rate increases.
D) inflation rate returns to the natural inflation rate and the unemployment rate returns to the natural unemployment rate.
E) inflation rate returns to the natural inflation rate and so there is no long-run tradeoff between the inflation rate and the unemployment rate.
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