Question: Suppose that expectations are not adaptive and that increases in the money supply cause the expected inflation rate to increase. a. In this case, when

Suppose that expectations are not adaptive and that increases in the money supply cause the expected inflation rate to increase.
a. In this case, when the Fed increases the money supply, what happens to long-term real interest rates?
b. How does the link between money supply increases and expected inflation change the Fed’s ability to affect the economy through the interest rate channel?

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