A Central Bank Can Reduce Inflation by Reducing Money Supply

question 141

True/False

A central bank can reduce inflation by reducing money supply growth, but it necessarily does so at the cost of permanently raising the unemployment rate.

---

Definitions:

Accrue Expense

An accounting method where expenses are recognized when incurred but not yet paid, reflecting the economic reality of the expense.

Prepaid Utilities

Expenses paid in advance for utilities services, recognized as assets on the balance sheet until they are consumed.

Accounting Cycle

The collective process of recording and processing the accounting events of a company, starting from the transaction occurrence to the preparation of financial statements.

Reporting Period

The specific timeframe for which financial statements are prepared, showing the financial position and performance of a company.