If Central Bank a Cares Only About Keeping the Price

question 72

Multiple Choice

If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level, then in response to an exogenous decrease in the velocity of money:

• A) both Central Bank A and Central Bank B should increase the quantity of money.
• B) Central Bank A should increase the quantity of money whereas Central Bank B should keep it stable.
• C) Central Bank A should keep the quantity of money stable whereas Central Bank B should increase it.
• D) both Central Bank A and Central Bank B should keep the quantity of money stable.

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Definitions:

Mortality Rate

A measure of the number of deaths in a particular population, scaled to the size of that population per unit of time.

Lost Earnings

The income that an individual fails to earn because of unemployment, illness, or other reasons that prevent them from working.

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Performers who execute intricate maneuvers and stunts while suspended in the air, often using equipment like trapezes, ropes, or silks.

Present Discounted Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.