Monetary Policy in Mokania

question 48

Multiple Choice

Monetary Policy in Mokania
Mokania has had inflation of 15% for many years. Mokania establishes a new central bank, the Bank of Mokania, with the hopes of reducing the inflation rate.

-Refer to Monetary Policy in Mokania.The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%.If it actually reduces inflation to 3% and people were expecting inflation to fall only to 8%,then

• A)unemployment falls but it would have fallen by more if the Bank of Mokania had reduced inflation to 5% rather than 3%.
• B)unemployment falls but it would have fallen by less if the Bank of Mokania had reduced inflation to 5% rather than 3%.
• C)unemployment rises but it would have risen by more if the Bank of Mokania had reduced inflation to 5% rather than 3%.
• D)unemployment rises but it would have risen by less if the Bank of Mokania had reduced inflation to 5% rather than 3%.

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Definitions:

Cash Collected

The total amount of money received by a company during a specific period, often through sales or services rendered.

Accrual Basis

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when cash transactions occur.

Accounting Principles

The standardized guidelines and rules followed by accountants to record, report, and summarize financial transactions, ensuring consistency and transparency.

Income Statement

A financial report that calculates a company's performance over a specific period, summarizing revenue, expenses, and profits.