If Monetary Policymakers Do Not Want an Increase in Government

question 83

Multiple Choice

If monetary policymakers do not want an increase in government purchases, which increases aggregate demand, to cause an increase in inflation, they would:

• A) shift the monetary policy reaction curve to the right, raising inflation at every real interest rate.
• B) do nothing and let the economy's self-correcting mechanism work.
• C) shift the monetary policy reaction function left, increasing the real interest rate at every rate of inflation.
• D) increase the growth rate of money.

---

Definitions:

Least Squares Regression

A statistical method used to model and analyze the relationship between a dependent variable and one or more independent variables by minimizing the sum of the squares of the differences between the observed and predicted values.

Variable Manufacturing Cost

Costs that vary with production volume, including direct materials, direct labor, and certain overheads.

Production Volume

The total quantity of units produced during a specific period.

Least-squares Regression

A statistical method used to determine the best-fitting line through a set of points by minimizing the sum of the squares of the offsets.