Assume a Central Bank Follows a Rule That Requires It

Multiple Choice

Assume a central bank follows a rule that requires it to take steps to keep the price level constant.If the price level rose because of an increase in aggregate demand and a decrease in aggregate supply that kept output unchanged,then

A) the central bank would have to decrease the money supply which would decrease output.
B) the central bank would have to decrease the money supply which would increase output.
C) the central bank would have to increase the money supply which would decrease output.
D) the central bank would have to increase the money supply which would increase output.