If a Central Bank Had to Give Up Its Discretion

question 106

Multiple Choice

If a central bank had to give up its discretion and had to follow a rule that required it to keep inflation low, how would the Phillips curve shift?

• A) The short-run Phillips curve would shift up.
• B) The short-run Phillips curve would shift down.
• C) The long-run Phillips curve would shift right.
• D) The long-run Phillips curve would shift left.

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Definitions:

Factory Overhead Rate

A cost allocation rate used in manufacturing to assign estimated overhead costs to production activities or output, based on a predetermined formula.

Direct Labor Hours

The total hours worked directly on the production of goods.

Overapplied Overhead

Occurs when the allocated manufacturing overhead costs are more than the actual overhead costs incurred, leading to adjustments in cost accounting records.

Overhead Rate

The ratio of indirect costs to a base activity, used to allocate overhead costs to products or job orders.