Suppose the Central Bank Targets a Low Rate of Unemployment

question 122

Multiple Choice

Suppose the central bank targets a low rate of unemployment.If a negative real shock occurs,the real growth rate will be:

• A) higher if the central bank counters the shock than if it does not react.
• B) lower if the central bank counters the shock than if it does not react.
• C) the same whether the central bank counters the shock or not.
• D) higher or lower if the central bank counters the shock than if it does not react,depending on people's expectations.