Making Use of Okun's Law, If the Bank of Canada

question 27

Multiple Choice

Making use of Okun's law, if the Bank of Canada reduces the money supply 5 percent and the quantity theory of money is true, then the unemployment rate will rise about:

• A)5 percent in both the short run and the long run.
• B)1.66 percent in both the short run and the long run.
• C)5 percent in the short run, but will return to its natural rate in the long run.
• D)1.66 percent in the short run, but will return to its natural rate in the long run.

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Definitions:

Gamete

A mature haploid male or female germ cell that is able to unite with another of the opposite sex in sexual reproduction to form a zygote.

Diploid

An organism or cell having two sets of chromosomes or twice the haploid number, typifying most body cells except for gametes.

Chromosomes

Thread-like structures located inside the nucleus of animal and plant cells, made of protein and a single molecule of DNA, responsible for carrying genetic information.

Sister Chromatids

Replicated forms of a chromosome joined together by a common centromere and eventually separated during cell division.