A Contractionary Monetary Policy That Has Been Imposed to Reduce

question 47

Multiple Choice

A contractionary monetary policy that has been imposed to reduce inflation will most likely

• A)have no effect on the short-run level of GDP and unemployment.
• B)not control inflation,since money supply changes have little or no effect on the price level.
• C)produce long-lasting unemployment if wages adjust rapidly.
• D)lead to a recession that is long and severe,under any circumstances.
• E)lead to a recession which will be short if inflation expectations adjust rapidly and accurately.

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Definitions:

Average Collection Period

The average number of days it takes for a company to receive payments owed by its customers for goods or services sold on credit.

Credit Sales

Credit sales are transactions where the buyer is allowed to pay for goods or services at a later date, extending credit.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered on credit.

Compensating Balance

A minimum balance that must be maintained in a bank account, often required by banks in return for loans or as part of a service agreement.