Use the Information Below to Answer the Following Questions

question 5

Multiple Choice

Use the information below to answer the following questions.
Fact 28.4.2
The Reserve Bank of New Zealand signed an agreement with the New Zealand government in which the Bank agreed to maintain inflation inside a low target range. Failure to achieve the target would result in the governor of the Bank losing his job.
-Consider Fact 28.4.2. Choose the correct statement.

• A)The short-run Phillips curve shifted downward because people believed that the Bank of New Zealand was serious about meeting the new low inflation target.
• B)A movement occurred down along the short-run Phillips curve because although the inflation rate fell, expectations did not change.
• C)Neither actual inflation nor expected inflation changed, and there was no change in the short-run Phillips curve.
• D)The short-run Phillips curve was abolished and New Zealand now has only a long-run Phillips curve.
• E)The short-run Phillips curve shifted leftward because when inflation expectations fall, the natural unemployment rate decreases.

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Definitions:

Monthly Compounding

An interest calculation method where the accrued interest is added to the principal sum every month, leading to an increase in the amount of subsequent interest accruements.

Effective Rate

The actual interest rate earned or paid on an investment or loan, taking into account the compounding of interest.

Quarterly Compounding

Interest calculation that occurs four times a year, effectively increasing the amount of interest accrued over time.

Effective Rate

The interest rate on a loan or financial product that reflects the compounding periods in a year, presenting a true annual rate of return.