If the Central Bank Increases the Growth Rate of the Money

question 468

Multiple Choice

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

• A)unemployment rises. In the long run the short-run Phillips curve shifts left.
• B)unemployment rises. In the long run the short-run Phillips curve shifts right.
• C)unemployment falls. In the long run the short-run the Phillips curve shifts left.
• D)unemployment falls. In the long run the short-run the Phillips curve shifts right.

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Definitions:

Budget Constraint

An economic term referring to the limitations on spending based on available resources, affecting decisions in consumption and investment.

Prices Change

Refers to the fluctuations in the cost of goods and services over time due to various economic factors.

Utility Maximization

Utility maximization is the process by which individuals choose the consumption of goods and services to achieve the highest level of satisfaction.

Budget Constraint

The limit on the consumption bundles that a consumer can afford based on income, prices, and wealth.