When a Central Bank Attempts to Stop a Sustained Inflation

question 53

Multiple Choice

When a central bank attempts to stop a sustained inflation, it tries to remove the inflationary gap by

• A)taking no action and allowing the market to correct itself.
• B)increasing the outward shift of the AD curve.
• C)shifting the AS curve upward.
• D)stopping the outward shift of the AD curve.
• E)shifting the AS curve downward.

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Definitions:

Dependent Variable

A variable in an experiment or study whose changes are subject to the variations in other variables (independent variables).

Predicted Values

The values estimated based on a statistical model that represents the expected outcome for a given set of input variables.

Least Squares Line

A straight line that best fits the data points on a scatter plot, minimizing the sum of the squares of the vertical distances of the points from the line.

Coefficient of Determination

A statistical measure, often denoted as \(R^2\), which quantifies the amount of variance of the dependent variable that can be explained by the independent variable(s).