Monetary Policy in Hyperion

question 136

Multiple Choice

Monetary Policy in Hyperion
In Hyperion the Department of Finance is responsible for monetary policy. Hyperion has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Hyperion.Suppose that the Hyperion Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but it actually raises inflation to 30%.Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%.Then

• A)unemployment falls, but it would have fallen less if people had been expecting 12.5% inflation.
• B)unemployment falls, but it would have fallen less if people had been expecting 25% inflation.
• C)unemployment rises, but it would have risen less if people had been expecting 12.5% inflation.
• D)unemployment rises, but it would have risen less if people had been expecting 25% inflation.

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Definitions:

Consolidated Financial Statements

Financial statements that show the financial position and results of operations for a parent company and its subsidiaries as one economic entity.

Elements of Control

Factors or conditions that grant an entity the power to govern the financial and operating policies of another entity, typically to benefit from its activities.

Relevant Activities

Activities that significantly affect the returns of an investment or project under consideration.

Funding Structure

Refers to the composition of an organization’s capital, including the mix of its debt and equity financing.