Use the Information Below to Answer the Following Questions

question 93

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 long-run Phillips curve does not change because a change in the expected inflation rate does not shift the long-run Phillips curve.
• B)The long-run Phillips curve shifts rightward.
• C)The long-run Phillips curve shifts leftward.
• D)The long-run Phillips curve was abolished and New Zealand now has only a short-run Phillips curve.
• E)The slope of the long-run Phillips curve changes when the expected inflation rate falls.

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Definitions:

Price System

An economic mechanism that uses prices arising from supply and demand interactions to communicate information to help guide the allocation of resources.

Scarce Goods

Goods that are limited in supply in comparison to their demand, necessitating allocation mechanisms.

Automatically Distributes

Refers to processes or systems that allocate resources, duties, or information without the need for human intervention.

Price Rationing

The process by which the market system allocates goods and services to consumers when quantity demanded exceeds quantity supplied.