Assume a Central Bank Has Been Charged with Maintaining the Price

question 55

Multiple Choice

Assume a central bank has been charged with maintaining the price level at a rate of 2 per cent. For the past twelve months the inflation rate has been at target and interest rates have been stable but the government has been concerned over signs of a slowdown in economic activity. As a result the government has decided to increase its spending on infrastructure projects. If the central bank wishes to maintain interest rates (and inflation) at a stable rate what should it do in the light if this decision?

• A) Nothing as changes in government spending on infrastructure does not affect consumer price inflation.
• B) Expand the money supply to maintain interest rates at a level consistent with its forecast of consumer price inflation.
• C) Reduce the money supply by an equal amount to counteract the increase in government spending.
• D) Persuade the government that any additional spending must be financed purely by taxation so that monetary policy does not have to change.

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Definitions:

Consent

The voluntary agreement to participate in sexual activity, without coercion, intimidation, or under the influence of substances.

Believe The Survivor

A principle advocating for the default support and belief of individuals who report being victims of sexual assault or abuse, emphasizing empathy and understanding.

Counselor

A trained professional who provides guidance and support, particularly in mental, emotional, or psychological matters.

Rape

A form of sexual assault usually involving sexual intercourse or other forms of sexual penetration carried out against a person without their consent.