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Tightening monetary policy refers to ____.
A) higher real interest rates
B) higher nominal interest rates
C) lower real interest rates
D) lower nominal interest rates
Answer: A
Diff: 2 Type: MC Page Ref: 560
Skill: Recall
Objective List: 22.3 Evaluate how fiscal policy variables (spending and taxes) and monetary
policy variables (the money supply and the interest rate) enter into these models
The upward slope of the MP curve indicates that ____.
A) the central bank lowers real interest rates when inflation rises
B) the central bank raises real interest rates when inflation falls
C) the central bank raises nominal interest rates when inflation rises
D) the central bank raises real interest rates when inflation rises
Answer: D
Diff: 2 Type: MC Page Ref: 560
Skill: Recall
Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
the interest rate
The Taylor Principle states that central banks raise nominal rates by ____ than any rise
in expected inflation so that real interest rates ____ when there is a rise in inflation.
A) less; rise
B) more; fall
C) less; fall
D) more; rise
Answer: D
Diff: 2 Type: MC Page Ref: 559
Skill: Recall
Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
the interest rate
An autonomous tightening of monetary policy ____.
A) causes an upward movement along the monetary policy curve
B) causes a downward movement along the monetary policy curve
C) shifts the monetary policy curve upward
D) shifts the monetary policy curve downward
Answer: C
Diff: 2 Type: MC Page Ref: 560
Skill: Recall
Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
the interest rate