If Central Bank a Cares Only About Keeping the Price

question 44

Multiple Choice

If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level, then in response to an exogenous increase in the price of oil:

• A) both Central Bank A and Central Bank B should increase the quantity of money.
• B) Central Bank A should increase the quantity of money whereas Central Bank B should keep it stable.
• C) Central Bank A should keep the quantity of money stable whereas Central Bank B should increase it.
• D) both Central Bank A and Central Bank B should keep the quantity of money stable.

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