The Japanese economy has experienced deflation (falls in the price level) for a number of years. Given this, which of the following statements is TRUE.

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Answer

The transactions demand for money curve in Japan has shifted to the left so less money is demanded for a given level of interest rates.

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The transactions demand for money curve in Japan has shifted to the left as less money is demanded for a given level of prices.

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According to the central banks policy reaction function there should be a fall in real interest rates.

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Both a and c are correct.

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Both b and c are correct.

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None of the answers is correct

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The Japanese economy has experienced deflation (falls in the price level) for a ...

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