If the Central Bank Responds to a Single Negative Supply

question 24

Multiple Choice

If the central bank responds to a single negative supply shock with monetary validation,we can expect an increase in

• A)the money supply but a decrease in costs and prices.
• B)costs but a decrease in real national income.
• C)the size of the output gap.
• D)costs,the price level,and the money supply.
• E)the price level and unemployment.

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Definitions:

Stock Variable

A measure of a quantity at a particular point in time, such as wealth or capital.

Flow Variable

A quantity that is measured over a specific period of time, such as income or expenditure.

Federal Taxes

Taxes collected by the federal government from individuals and corporations to fund public goods and services.

Federal Debt

The total amount of money owed by the federal government, accrued from past borrowing.