Monetary Policy in Flosserland

question 36

Multiple Choice

Monetary Policy in Flosserland

In Flosserland, the Department of Finance is responsible for monetary policy. Flosserland has had an inflation rate of 25% for many years.

-Refer to Monetary Policy in Flosserland.Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but that it actually leaves inflation at 25%.Suppose that the public had expected that the Department of Finance would reduce inflation,but only to 20%.Then

• A)unemployment falls,but it would have fallen more if people had been expecting 12.5% inflation.
• B)unemployment falls,but it would have fallen more if people had been expecting 22% inflation.
• C)unemployment rises,but it would have risen more if people had been expecting 12.5% inflation.
• D)unemployment rises,but it would have risen more if people had been expecting 22% inflation.

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Definitions:

Secure

The condition of being protected from or not exposed to danger, risk, or anxiety; having a sense of safety.

Subordinates

Individuals who are lower in rank or position in an organizational hierarchy and typically report to someone with higher authority.

Stir Up

To provoke or evoke a reaction, emotion, or movement.

Systems Theory

An interdisciplinary theory about the nature of complex systems in nature, society, and science, aiming to understand how such systems function and adapt.