A Contractionary Monetary Policy That Has Been Imposed to Reduce

question 47

Multiple Choice

A contractionary monetary policy that has been imposed to reduce inflation will most likely

• A)have no effect on the short-run level of GDP and unemployment.
• B)not control inflation,since money supply changes have little or no effect on the price level.
• C)produce long-lasting unemployment if wages adjust rapidly.
• D)lead to a recession that is long and severe,under any circumstances.
• E)lead to a recession which will be short if inflation expectations adjust rapidly and accurately.

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Definitions:

Semi-Annual Interest

Interest payments made two times a year on a loan or investment.

Annual Interest

The amount of interest to be paid or earned over a year, often related to loans, savings, or investments.

Current Monetary Liability

A short-term financial obligation that is expected to be settled within a year using cash or other monetary resources.

Undiscounted Amount

The total amount of cash flow without adjusting for its present value or interest rates.