Monetary Policy in Highland

question 304

Multiple Choice

Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central bank, the Bank of Highland, with the hopes of reducing the inflation rate.
-Refer to Monetary Policy in Highland. The Bank of Highland reduced inflation to its announced goal of 5%. However, people were expecting inflation to fall to 7% and there was a favorable supply shock. In the short run which of the following made unemployment lower than otherwise?

• A)both people expecting inflation to fall to 7% instead of 5%, and the favorable supply shock
• B)neither people expecting inflation to fall to 7% instead of 5%, and the favorable supply shock
• C)only the favorable supply shock
• D)only people expecting inflation to fall to 7% instead of 5%

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Definitions:

Raw Materials

Fundamental substances utilized as the starting point in the manufacturing process to create products.

Predetermined Overhead

An estimated amount of overhead cost assigned to each unit of production in advance of the actual production.

Actual Manufacturing

The real and factual process of producing goods, as opposed to planned or estimated production.

Job-Order Costing

An accounting method used to track costs and revenue for individual jobs or batches, suitable for customized orders.