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:

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment relative to its cost.

Average Operating Assets

The average value of the assets used in day-to-day operations over a certain period, important for determining return on investment and operational efficiency.

Operating Expenses

Costs related to the normal operations of a business, excluding costs of goods sold, such as sales and marketing expenses.

Average Operating Assets

The average value of assets used in the production or operations of a company over a specific period, often used in performance metrics like return on investment.