Monetary Policy in Flosserland

question 36

Multiple Choice

Monetary Policy in Flosserland

In Flosserland, the Department of Finance is responsible for monetary policy. Flosserland has had an inflation rate of 25% for many years.

-Refer to Monetary Policy in Flosserland.Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but that it actually leaves inflation at 25%.Suppose that the public had expected that the Department of Finance would reduce inflation,but only to 20%.Then

• A)unemployment falls,but it would have fallen more if people had been expecting 12.5% inflation.
• B)unemployment falls,but it would have fallen more if people had been expecting 22% inflation.
• C)unemployment rises,but it would have risen more if people had been expecting 12.5% inflation.
• D)unemployment rises,but it would have risen more if people had been expecting 22% inflation.

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Definitions:

Factual Information

Data or details that are true, objective, and can be verified or proven.

Accommodation

Adjusting one’s own behavior or thoughts to be more compatible with others or to deal effectively with new situations.

Little Importance

A term used to denote items, issues, or topics that are considered to have minimal significance or priority.

Avoidance

A strategy or behavior aimed at steering clear of certain situations, conflicts, or responsibilities due to perceived potential negative outcomes.