Monetary Policy in Mokania

question 43

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 reduced inflation to its announced goal of 5%.However its efforts made the unemployment rate rise by 10 percentage points for a year while output fell by 30 percent for a year.Which of the following is correct?

• A)Initially people's inflation expectations had been higher than 5%.The sacrifice ratio was 3.
• B)Initially people's inflation expectations had been higher than 5%.The sacrifice ratio was 1.
• C)Initially people's inflation expectations had been lower than 5%.The sacrifice ratio was 3.
• D)Initially people's inflation expectations had been lower than 5%.The sacrifice ratio was 1.

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Definitions:

Time Consuming

Activities or tasks that require a considerable or excessive amount of time to complete.

Situation Analysis

An evaluation process that identifies an organization's internal strengths and weaknesses, along with external opportunities and threats.

Strategic Plan

A systematic process for envisioning a desired future, and translating this vision into broadly defined goals or objectives and a sequence of steps to achieve them.

Current Situation

A phrase referring to the present state or conditions of an event, issue, or circumstance.