If a Central Bank Had to Give Up Its Discretion

question 26

Multiple Choice

If a central bank had to give up its discretion and follow a rule that required it to keep inflation low,

• A)the short-run Phillips curve would shift up.
• B)the short-run Phillips curve would shift down.
• C)the long-run Phillips curve would shift right.
• D)the long-run Phillips curve would shift left.

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Definitions:

Benefit

The advantage or profit gained from something, often used in the context of weighing costs against benefits in decision-making processes.

Freely Functioning Market

A market where goods and services are traded without any restrictions or interventions from governments.

Government Intervention

Actions taken by a government to affect the economy, which can include regulations, subsidies, tariffs, and taxes.

Efficient

The optimal allocation of resources in a manner that maximizes output or outcomes without wasting any resources.