If It Is Clear That an Economic Disturbance Is Only

question 34

Multiple Choice

If it is clear that an economic disturbance is only transitory, a central bank's best policy response may be to

• A)react moderately or not at all because a major policy change may itself be destabilizing
• B)recommend fiscal policy changes, which will have less powerful effects than monetary policy changes
• C)act quickly and vigorously so financial markets do not overreact
• D)announce a policy change and then wait to see the reaction of financial markets before deciding whether or not to actually implement it
• E)avoid a potential increase in inflation by asking banks to ration credit

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Definitions:

Monthly Sales

The total revenue generated from goods or services sold by a business within a month.

Variable Expenses

Costs that change in proportion to the activity of a business.

Sales

Revenue generated from the sale of goods or services to customers.

Fixed Expenses

Costs that do not change in total regardless of changes in the volume of production or sales.