It Is Important to Note That, When Confronted with a Supply

question 51

Multiple Choice

It is important to note that, when confronted with a supply shock, a central bank such as the Fed has two choices. Which of the below is ONE of these choices?

• A) The banking authorities can shoot for zero unemployment.
• B) The banking authorities can refuse to accommodate the higher price levels that follow the shock by matching them with an increase in the money supply.
• C) The Fed can choose to shoot for a goal of low employment of the civilian labor force.
• D) The Fed can choose shoot for a goal of high unemployment of the civilian labor force.

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Definitions:

Scarp

A steep slope or cliff, typically formed by erosion or faulting.

Refraction

The bending of a wave as it passes at an angle from one medium to another, altering its speed.

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Waves of energy that travel through the Earth’s layers, resulting from earthquakes, volcanic eruptions, or other seismic events.

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