If a Central Bank Were Required to Target Inflation at Zero,then

question 2

Multiple Choice

If a central bank were required to target inflation at zero,then when there was a negative aggregate supply shock the central bank

• A)would have to increase the money supply.This would move unemployment closer to the natural rate.
• B)would have to increase the money supply.This would move unemployment further from the natural rate.
• C)would have to decrease the money supply.This would move unemployment closer to the natural rate.
• D)would have to decrease the money supply.This would move unemployment further from the natural rate.

---

Definitions:

Cognitive Confusion

A state of being perplexed or unclear, often resulting from a disruption in one’s mental faculties or the presence of conflicting thoughts and feelings.

Maladaptive Behaviour

Actions or tendencies that are counterproductive to oneself or to one’s ability to adapt or interact successfully within the environment.

Personal Distress

A psychological discomfort or anguish caused by exposure to others’ suffering or emergency situations, leading to a desire to alleviate that suffering.

DSM-5

The 5th edition of the Diagnostic and Statistical Manual of Mental Disorders, a handbook used by healthcare professionals for diagnosing mental disorders.