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If Central Bank a Cares Only About Keeping the Price

Question 34

Multiple Choice

If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level, then in response to an exogenous increase in the price of oil:


A) both Central Bank A and Central Bank B should increase the quantity of money.
B) Central Bank A should increase the quantity of money, whereas Central Bank B should keep it stable.
C) Central Bank A should decrease the quantity of money, whereas Central Bank B should increase it.
D) both Central Bank A and Central Bank B should keep the quantity of money stable.

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