Suppose That the Central Bank Is Required to Follow a Monetary

question 24

Multiple Choice

Suppose that the central bank is required to follow a monetary policy rule to stabilize prices.If the economy starts at long-run equilibrium and then aggregate supply shifts right,the central bank would have to

• A)increase the money supply,which causes output to move closer to its long-run equilibrium.
• B)increase the money supply,which causes output to move farther from long-run equilibrium.
• C)decrease the money supply,which causes output to move closer to its long-run equilibrium.
• D)decrease the money supply,which causes output to move farther from long-run equilibrium.

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Definitions:

Taxpayers

Individuals and entities that are required to pay taxes to government authorities, based on income, property ownership, or consumption.

Export Subsidies

Financial support from the government to companies for the purpose of encouraging exports of goods to foreign countries.

Agricultural Products

Goods derived from farming and agriculture, including food items, feed, fiber, and biofuel commodities.

Tariffs

Taxes imposed by a government on imported or occasionally exported goods, often used to protect domestic industries from foreign competition.