Monetary Policy in Southland

question 210

Multiple Choice

Monetary Policy in Southland
In Southland the Department of Finance is responsible for monetary policy. Southland has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Southland. Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level. 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 more if people had been expecting 12.5% inflation.
• B)unemployment falls, but it would have fallen more if people had been expecting 25% inflation.
• C)unemployment rises, but it would have risen more if people had been expecting 12.5% inflation.
• D)unemployment rises, but it would have risen more if people had been expecting 25% inflation.

---

Definitions:

Ronald Reagan

The 40th President of the United States, serving from 1981 to 1989, known for his conservative policies, economic reforms, and role in ending the Cold War.

George Bush

Refers to either George H. W. Bush (41st President of the United States) or George W. Bush (43rd President of the United States), both members of the Bush political family.

Excise Taxes

Taxes levied on specific goods or services, such as alcohol and tobacco, often intended to discourage their use or raise revenue.

Progressive

A social or political ideology that advocates for reform and innovation, emphasizing progressive changes in society.