Suppose That the Central Bank Is Required to Follow a Monetary

question 24

Multiple Choice

Suppose that the central bank is required to follow a monetary policy rule to stabilize prices.If the economy starts at long-run equilibrium and then aggregate supply shifts right,the central bank would have to

• A)increase the money supply,which causes output to move closer to its long-run equilibrium.
• B)increase the money supply,which causes output to move farther from long-run equilibrium.
• C)decrease the money supply,which causes output to move closer to its long-run equilibrium.
• D)decrease the money supply,which causes output to move farther from long-run equilibrium.

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Definitions:

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A statistical method that uses sample data to evaluate a hypothesis about the properties of a population.

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The likelihood of achieving test outcomes that are as significant or more so than the observed results, assuming the null hypothesis is true.

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