Author Question: Which of the following is not an appropriate policy for a central bank to follow if the economy is ... (Read 186 times)

pragya sharda · **on:** Jun 29, 2018

Which of the following is not an appropriate policy for a central bank to follow if the economy is plagued with deflation?

A) consistently pursuing policy to promote the credibility of the central bank
B) explicitly and credibly targeting inflation
C) using expansionary monetary policy to drive down interest rates
D) increasing the target interest rate on overnight loans

Question 2

A price ceiling imposed below the equilibrium price ______.

A. creates a black market in which the price might equal or exceed the equilibrium price
B. creates a black market in which the price equals the price ceiling
C. leads to increased search activity, which reduces the shortage of the good
D. increases the demand for the good, which makes the shortage even larger

nguyenhoanhat · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

A The price in black markets lies between the ceiling price and the maximum price demanders will pay for the quantity pro-duced.