Suppose That the Central Bank Must Follow a Rule That

question 92

Multiple Choice

Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate demand shifts right, what must the central bank do, and what will happen to output?

• A)The central bank must decrease the money supply, which will move output back towards its long-run level.
• B)The central bank must decrease the money supply, which will move output farther from its long-run level.
• C)The central bank must increase the money supply, which will move output back towards its long-run level.
• D)The central bank must increase the money supply, which will move output farther from its long-run level.

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Definitions:

Ventilatory Function

Refers to the mechanics of breathing, including the movement and exchange of air through the lungs.

Respiratory Therapist

A healthcare professional specialized in evaluating, treating, and caring for patients with breathing or other cardiopulmonary disorders.

Respiratory Tract

The pathway that air takes to move in and out of the lungs, including the nose, throat, windpipe, and airways of the lungs.

Physical Agents

Natural or manufactured sources of energy such as heat, light, sound, and radiation, used therapeutically to treat various medical conditions.