Assume a Central Bank Follows a Rule That Requires It

question 9

Multiple Choice

Assume a central bank follows a rule that requires it to take steps to keep the price level constant.If the price level fell because of a decrease in aggregate demand and an increase in aggregate supply that kept output unchanged,then

• A)the central bank would have to decrease the money supply which would decrease output.
• B)the central bank would have to decrease the money supply which would increase output.
• C)the central bank would have to increase the money supply which would decrease output.
• D)the central bank would have to increase the money supply which would increase output.

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Definitions:

Earnings Distributed

Refers to the portion of a company's profit paid out to shareholders, typically in the form of dividends.

Corporate Tax

A tax imposed on the income or profit of corporations and other business entities by the government.

Taxable Income

The amount of individual or corporate income upon which the tax authorities levy taxes, after all deductions and exemptions.

Balance Sheet

A financial statement that provides a snapshot of a company's financial position at a specific point in time, showing assets, liabilities, and shareholders' equity.