Restrictive Monetary Policies Are Most Likely to Be Used by the Central

question 202

Multiple Choice

Restrictive monetary policies are most likely to be used by the central bank when an economy faces:

• A)a high rate of inflation.
• B)a high rate of unemployment.
• C)a recession.
• D)a negative GDP gap.

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Definitions:

Mental Accounting

The cognitive process individuals use to organize, evaluate, and keep track of their financial activities and decisions.

Irrational Decisions

Decisions made that do not follow logical reasoning or expected outcomes.

Opportunity Cost

The missed opportunity for profit from different options when a specific choice is made.

Resources

Assets, materials, and inputs used to produce goods and services, including land, labor, capital, and entrepreneurship.