The Most Appropriate Monetary Policy Response to an Asset Price

question 117

Multiple Choice

The most appropriate monetary policy response to an asset price bubble for a central bank is to:

• A) react to asset price bubbles because they can easily be identified.
• B) not react to asset price bubbles because its actions will lead to a recession.
• C) react to asset price bubbles aggressively because they cannot be popped any other way.
• D) not react to asset price bubbles because monetary policy can only affect aggregate demand,not demand in a specific market.

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