If the Central Bank Uses Monetary Policy to Attempt to Hold

question 62

Multiple Choice

If the central bank uses monetary policy to attempt to hold Y permanently above Y^*,

• A)inflation will accelerate over time.
• B)it will fail.
• C)the AD curve will shift leftward to cure the inflation problem.
• D)inflation is not a problem, but unemployment is.
• E)inflation can be kept at a low, constant rate.