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5. A contractionary monetary policy Complete the following sentences with the most appropriate
answer. Throughout the 1970 s, the inflation rate was very high in the US. To stabilize the price
level, in the early 1980s, the FRB conducted a contractionary monetary policy by (selling / buying)
government bonds in the open market. As a result, the IS curve (shifted to the left / shifted to the
right / did not shift). In the short run, the LM curve (shifted upward / shifted downward / did not
shift), and the nominal interest rates (decreased / increased).

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