Suppose That the Central Bank Must Follow a Rule That

question 16

Multiple Choice

Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises.If the economy starts from long-run equilibrium and aggregate demand shifts right,the central bank must

• A)increase the money supply so interest rates rise.
• B)increase the money supply so interest rates fall.
• C)decrease the money supply so interest rates rise.
• D)decrease the moneys supply so interest rates fall

---

Definitions:

Chronic Stressor

A persistent stress source that continues over an extended period of time, potentially causing long-term health issues.

Panic Attack

A sudden episode of intense fear or anxiety that triggers severe physical reactions, often without a clear cause.

Direct Physiological Effects

Immediate impacts on the body's systems and functions directly resulting from specific causes without intermediary steps.

Elevated Blood Pressure

A condition in which the force of the blood against the artery walls is higher than normal, potentially leading to heart disease.