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:

Ralph Waldo Emerson

An American essayist, lecturer, philosopher, and poet who led the transcendentalist movement of the mid-19th century, advocating for individualism and the inherent goodness of people and nature.

Ban Alcohol

The prohibition of the manufacture, sale, and consumption of alcoholic beverages, notably practiced in the United States from 1920 to 1933.

Medical Purposes

The use of substances, procedures, or treatments to diagnose, cure, treat, or prevent disease, injury, or other physical or mental impairments in humans.

Maine

Maine is a state in the New England region of the northeastern United States, known for its scenic coastlines, maritime history, and as the leading producer of lobsters in the country.