Monetary Policy in Mokania

question 75

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,people were expecting inflation to fall to 7% and there was a favorable supply shock.In the short run which of the following made unemployment lower than otherwise?

• A)both people expecting inflation to fall to 7% instead of 5%,and the favorable supply shock
• B)neither people expecting inflation to fall to 7% instead of 5%,and the favorable supply shock
• C)only the favorable supply shock
• D)only people expecting inflation to fall to 7% instead of 5%

---

Definitions:

Unique Product

A product that offers a distinct set of qualities or features not possessed by similar products in the market, providing a competitive advantage.

Purchasing Product

The act of acquiring goods or services by customers in exchange for money, reflecting consumer behavior and market demand.

Benefit

An advantage, improvement, or gain that is obtained from something.