Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises.If the economy starts from long-run equilibrium and aggregate supply shifts left,the central bank must
A) decrease the money supply,which will move output back towards its long-run level.
B) decrease the money supply,which will move output farther from its long-run level.
C) increase the money supply,which will move output back towards its long-run level.
D) increase the money supply,which will move output farther from its long-run level.
Correct Answer:
Verified
Q17: The Federal Open Market Committee
A)operates with almost
Q18: If there is a political business cycle
Q21: According to the political business cycle,after an
Q24: Assume a central bank follows a rule
Q25: Suppose that the central bank must follow
Q26: Assume a central bank follows a rule
Q123: A law that requires the money supply
Q129: Time inconsistency will cause the
A)short-run Phillips curve
Q136: Edward Prescott and Finn Kydland won the
Q139: Paul Volcker, former chair of the Fed,
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents