If a Central Bank Were Required to Target Inflation at Zero,then

question 13

Multiple Choice

If a central bank were required to target inflation at zero,then when there was an unanticipated increase in aggregate supply the central bank

• A)would have to increase the money supply.This would move unemployment closer to the natural rate.
• B)would have to increase the money supply.This would move unemployment further from the natural rate.
• C)would have to decrease the money supply.This would move unemployment closer to the natural rate.
• D)would have to decrease the money supply.This would move unemployment further from the natural rate.

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Definitions:

Funds

Resources in the form of money available for transactions or investments.

Free Bus Rides

A policy or situation where public transportation buses are provided to passengers without any charge.

Deregulation

The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry.

Regulatory Capture

A situation where regulatory agencies are dominated by the industries or interests they are charged with regulating, often leading to decision-making that benefits the industry at the expense of the public interest.