If Monetary Policymakers Are More Concerned About Output Fluctuations Than

question 98

Multiple Choice

If monetary policymakers are more concerned about output fluctuations than inflation fluctuations:

• A)They will choose a relatively steep monetary policy reaction curve in which movements in the real interest rates are small
• B)They will choose a relatively flat monetary policy reaction curve in which movements in the real interest rates are small
• C)They will choose a relatively steep monetary policy reaction curve in which movements in the real interest rates are large
• D)They will choose a relatively flat monetary policy reaction curve in which movements in the real interest rates are large

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Definitions:

Efficient Quantity

The amount of a good or service that maximizes the net benefit to society.

Nonrival

A characteristic of a good where one person's consumption does not reduce availability for others.

Inefficiently Low

A situation in which the production or use of goods and services is below the level that could maximize welfare or efficiency.

Nonrival

A characteristic of a good or service where one person's consumption does not reduce its availability for others, often used in the context of public goods.