A Central Bank That Chooses a Large Value of θ_π

question 48

Multiple Choice

A central bank that chooses a large value of θ_π and a small value of θ_Y is choosing to obtain less _____ at the expense of more _____.

• A)inflation; output
• B)output; inflation
• C)inflation variability; output variability
• D)output variability; inflation variability

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Definitions:

Excess Burden

The cost to society created by market inefficiency, particularly through taxation or other government policies, beyond the immediate financial effects.

Tax Revenue

The income that is gained by governments through taxation, which is used to fund public services and infrastructure.

Total Burden

The complete impact, often financial or economic, borne by an entity or system as a consequence of a particular action or policy.

Partnerships

A lawful business structure involving two or more people who jointly manage and distribute earnings.