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Question
Suppose the neutral federal funds rate is equal to 5%. If the actual federal funds rate is 3.5%, we would expect that
A) the rate of growth of real GDP will be less than its potential rate of growth.
B) the rate of growth of real GDP will be greater than its potential rate of growth.
C) the rate of growth of real GDP will be equal to its potential rate of growth.
D) the rate of growth of real GDP may be above or below its potential rate of growth.
Answer
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