If Fed a Cares Only About Keeping the Price Level

question 8

Multiple Choice

If Fed A cares only about keeping the price level stable and Fed B cares only about keeping output at its natural level, then in response to an exogenous increase in the price of oil:

• A)both Fed A and Fed B should increase the quantity of money.
• B)Fed A should increase the quantity of money whereas Fed B should keep it stable.
• C)Fed A should keep the quantity of money stable whereas Fed B should increase it.
• D)both Fed A and Fed B should keep the quantity of money stable.

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Definitions:

Enforcing

The act of compelling compliance or obedience; ensuring that laws, rules, or orders are followed through appropriate actions or measures.

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Payments made from the government to eligible individuals, typically retirees or disabled workers, as part of a social insurance program.

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