If a Central Bank Wants to Avoid High Inflation in an Economic

question 6

Multiple Choice

If a central bank wants to avoid high inflation in an economic boom it can

• A)try to lower investment spending though open market purchases
• B)raise interest rates in an effort to affect aggregate supply
• C)lower bank reserves by buying government bonds
• D)decrease the level of potential GDP by permanently restricting money supply growth
• E)none of the above

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Definitions:

Test Statistic

A statistic calculated from sample data, used to determine the p-value in hypothesis testing.

Degrees Of Freedom

The number of independent values or quantities that can vary in the calculation of a statistic.

Null Hypothesis

A statement that there is no effect or no difference, which is tested statistically to be either rejected or not rejected based on data.

Expected Frequencies

The predicted count of occurrences across different categories in a statistical analysis.