A Monetary Policy Rule Is When the Monetary Authority

question 41

Multiple Choice

A monetary policy rule is when the monetary authority:

• A)does not commit to future monetary actions.
• B)commits to future monetary actions.
• C)often produces a monetary surprise to households.
• D)always behaves in unpredictable ways.

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Definitions:

Potential GDP

The maximum possible level of output an economy can achieve when all resources are utilized efficiently, without causing inflation.

Prices

The amount of money required to purchase goods or services, acting as a signal in the market to influence supply and demand.

Natural Level of Employment

The rate of employment where the labor market is in equilibrium, with no cyclical unemployment.

Prolonged Unemployment

Prolonged unemployment refers to an extended period during which an individual remains jobless despite actively seeking employment, often leading to significant economic and psychological consequences.