Monetary Policy in Mokania

question 43

Multiple Choice

Monetary Policy in Mokania
Mokania has had inflation of 15% for many years. Mokania establishes a new central bank, the Bank of Mokania, with the hopes of reducing the inflation rate.

-Refer to Monetary Policy in Mokania.The Bank of Mokania reduced inflation to its announced goal of 5%.However its efforts made the unemployment rate rise by 10 percentage points for a year while output fell by 30 percent for a year.Which of the following is correct?

• A)Initially people's inflation expectations had been higher than 5%.The sacrifice ratio was 3.
• B)Initially people's inflation expectations had been higher than 5%.The sacrifice ratio was 1.
• C)Initially people's inflation expectations had been lower than 5%.The sacrifice ratio was 3.
• D)Initially people's inflation expectations had been lower than 5%.The sacrifice ratio was 1.

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Definitions:

Antidiuretic Hormone

A hormone released by the pituitary gland that regulates water balance by reducing urine production and increasing water reabsorption by the kidneys.

Posterior Pituitary

The rear portion of the pituitary gland, responsible for the storage and release of antidiuretic hormone (ADH) and oxytocin, which play roles in water balance and childbirth respectively.

Anterior Pituitary

A glandular portion of the pituitary gland responsible for the release of several key hormones influencing various body functions.

Thyroid Hormone Levels

The concentration of hormones produced by the thyroid gland, crucial for regulating metabolism, energy generation, and overall growth and development.