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Suppose that you are employed as an advisor to the central bank
Suppose that you are employed as an advisor to the central bank. Select the proper policy recommendation or economic prediction for each of the following scenarios.
1. Which policy is appropriate when a rising aggregate price level is a concern but GDP is growing at an acceptable rate?
a) it is unclear which type of monetary policy is appropriate.
b)expansionary monetary policy (easy money policy)
c)contractionary or restrictive monetary policy (tight money policy)
2. Which policy is appropriate when a rising aggregate price level is a concern and GDP is not growing at an acceptable rate?
a) It is unclear which type of monetary policy is appropriate.
b) expansionary monetary policy (easy money policy)
c) contractionary or restrictive monetary policy (tight money policy)
3. Contractionary or restrictive monetary policy (tight money policy) will cause interest rates to
a) decrease.
b) increase.
c) increase sometimes and decrease sometimes.
Expert Solution
Answer 1:-Option (c) is the correct answer.
Answer 2:- Option (a) is the correct answer.
Answer 3:- option (b) is the correct answer.
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