Suppose That the Central Bank Must Follow a Rule That

question 35

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,the central bank must

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

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Definitions:

Partisan Politics

Political actions or decisions that are strongly influenced by allegiance to a particular political party or ideology, often leading to division.

Federal Level

Pertaining to the national government of a country, as opposed to state or local levels.

Attack Strategy

A plan or method aimed at undermining or competing against an opponent or adversary, often used in political, business, or marketing contexts.

Unintended Impact

Outcomes or effects that were not anticipated or planned for, often occurring as a result of an action or decision.