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.
b
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List the four criteria that are generally used to evaluate economic outcomes
What will be an ideal response?
Suppose a banking system has $200 million in deposits, a required reserve ratio of 10 percent, and total bank reserves of $35 million. Then the potential increase in deposit creation for the whole banking system is equal to
A. $3 million. B. $0. C. $15 million. D. $150 million.
All of the following are incomes earned in the factor market EXCEPT
A. prices of goods and services. B. rents. C. profits. D. wages.
The marginal propensity to consume (MPC) is equal to
A) 1 + MPS. B) 1 - MPS. C) MPS + 1. D) MPS - 1.