If a Point Lies on the Monetary Policy Reaction Curve

question 59

Multiple Choice

If a point lies on the monetary policy reaction curve, and at this point the inflation rate equals the target rate of inflation, we know that:

• A) the real interest rate corresponding to this point is above the long-run real interest rate.
• B) the real interest rate corresponding to this point is equal to the long-run real interest rate.
• C) the real interest rate corresponding to this point is below the long-run real interest rate.
• D) current output is above potential output.

---

Definitions:

Unconscious Reaction

An automatic response that occurs below the level of conscious awareness.

Anxiety

Sensing apprehension, stress, or restlessness over an event with an unpredictable result.

Abandonment

The act of leaving someone without support or care, often resulting in emotional or psychological distress.

Adrenal Medulla

The inner part of the adrenal glands that releases adrenaline and noradrenaline in response to stress, thereby preparing the body for 'fight or flight' reactions.