An Economist Advising a Central Bank Intending to Reduce the Inflation

question 33

Multiple Choice

An economist advising a central bank intending to reduce the inflation rate would likely point out that

• A)the costs of reducing inflation persist and the costs of reducing it do not depend on the public's inflation expectations.
• B)the costs of reducing inflation persist,but they are smaller if the public reduces its inflation expectations.
• C)the costs of reducing inflation are temporary and the costs of reducing it do not depend on the public's inflation expectations.
• D)the costs of reducing inflation are temporary and the costs are smaller if the public reduces its inflation expectations.

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Definitions:

ACTH

Adrenocorticotropic Hormone, a peptide hormone produced by the pituitary gland that stimulates the production of cortisol by the adrenal glands.

Cortisol

Cortisol is a steroid hormone released by the adrenal glands, often in response to stress and low blood-glucose concentration.

Atrial Natriuretic Peptide

A hormone secreted by the heart's atria that regulates blood volume and pressure by reducing water, sodium, and adipose loads in the bloodstream.

Heart

A muscular organ in most animals, which pumps blood through the blood vessels of the circulatory system.