If a Central Bank Were Required to Target Inflation at Zero,then

question 2

Multiple Choice

If a central bank were required to target inflation at zero,then when there was a negative aggregate supply shock the central bank

• A)would have to increase the money supply.This would move unemployment closer to the natural rate.
• B)would have to increase the money supply.This would move unemployment further from the natural rate.
• C)would have to decrease the money supply.This would move unemployment closer to the natural rate.
• D)would have to decrease the money supply.This would move unemployment further from the natural rate.

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Definitions:

Profitable Level

The point at which a business or operation generates revenue that exceeds its costs, leading to profitability.

Given Price

A specific price point that is set or assumed within a particular context, often used as a reference in economic analysis.

Profit-Maximizing Output

The level of production at which a firm achieves the greatest difference between total revenue and total cost, optimizing its profit.

Market Price

The market's current rate for transactions related to the purchase or sale of an asset or service.