Monetary Policy in Mokania

question 19

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 the unemployment rate was on average higher for many years after.A newspaper editorial argues that the unemployment rate had moved to this higher natural rate because (1) by itself the decrease in inflation had permanently increased unemployment and (2) that at the same time the central bank was fighting inflation the government of Mokania had made a large increase in the minimum wage.Which of these arguments is consistent with the Phillip's curve model?

• A)both explanations 1 and 2
• B)neither explanation 1 nor 2
• C)explanation 1 but not explanation 2
• D)explanation 2 but not explanation 1

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Definitions:

Compensation Committee

A subgroup of a company's board of directors responsible for determining executive compensation packages and policies.

Incentive Award

A reward or bonus given to employees as recognition for achieving specific goals or outstanding performance.

Financial Statements

A collection of reports about an organization's financial results, financial position, and cash flows.

Regulatory Agencies

Government or authorized bodies that oversee and enforce standards and regulations in specific industries to ensure compliance and protect public interests.