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:

Life Insurance

A contract between an insurer and a policyholder, providing a death benefit to beneficiaries in exchange for premiums paid by the policyholder.

Positive Reinforcement

An approach to encourage a specific behavior by offering a reward or positive outcome after the behavior is exhibited.

Contingent

Dependent on or conditioned by something else; not absolute or certain.

Pleasant Event

An occurrence or activity that brings joy, satisfaction, or positive feelings to an individual.