Monetary Policy in Mokania

question 19

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 the unemployment rate was on average higher for many years after.A newspaper editorial argues that the unemployment rate had moved to this higher natural rate because (1) by itself the decrease in inflation had permanently increased unemployment and (2) that at the same time the central bank was fighting inflation the government of Mokania had made a large increase in the minimum wage.Which of these arguments is consistent with the Phillip's curve model?

• A)both explanations 1 and 2
• B)neither explanation 1 nor 2
• C)explanation 1 but not explanation 2
• D)explanation 2 but not explanation 1

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Definitions:

Perpetual Inventory System

An inventory management system that updates inventory records for each purchase and sale in real time.

Cost Of Goods Sold

The total expenses directly related to the production of goods sold by a company, including material and labor costs.

FOB Shipping Point

A term used in shipping agreements indicating that the buyer assumes responsibility for the goods and the cost of transport once the goods leave the seller's premises.

Title To Merchandise

The legal right or ownership of goods and products, which is transferred from the seller to the buyer when the conditions of a sale are met.