Suppose That the Central Bank Is Required to Follow a Monetary

question 25

Multiple Choice

Suppose that the central bank is required to follow a monetary policy rule to stabilize prices. If the economy starts at long-run equilibrium and then aggregate supply shifts right, what should the central bank do, and what will happen to output?

• A) The central bank should increase the money supply, which causes output to move closer to its long-run equilibrium.
• B) The central bank should increase the money supply, which causes output to move farther from its long-run equilibrium.
• C) The central bank should decrease the money supply, which causes output to move closer to its long-run equilibrium.
• D) The central bank should decrease the money supply, which causes output to move farther from its long-run equilibrium.

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Definitions:

Attraction

The force or influence that draws individuals towards others, objects, or concepts, driven by factors such as physical appearance, personal preferences, or psychological compatibility.

Overexposure

The state of being exposed too much to something, such as media or sunlight, which can lead to negative consequences.

Exposure

is the state of being exposed to something, which can refer to elements such as light, ideas, diseases, or chemicals, affecting individuals or groups differently based on duration and intensity.

Gender

Socially constructed roles, behaviors, activities, and attributes that a given society considers appropriate for men and women.