In the Event of a Supply Shock, a Central Bank

question 72

Multiple Choice

In the event of a supply shock, a central bank that prioritizes stable inflation over GDP, will:

• A) try to boost aggregate demand.
• B) increase interest rates.
• C) not take any action because the supply shock is temporary.
• D) increase money supply.

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Definitions:

Net Income

The total earnings of a company after subtracting all expenses and taxes from total revenue.

Break-even Level

The point at which total costs equal total revenues, resulting in neither profit nor loss.

Variable Costs

Expenses that change in proportion to the amount of goods produced or the volume of sales.

Fixed Costs

Expenses that do not change with the level of production or sales in the short term, such as rent or salaries.