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 fell because of a decrease in aggregate demand and an increase in aggregate supply that kept output unchanged,then

A) the central bank would have to raise interest rates which would decrease output.
B) the central bank would have to raise interest rates which would increase output.
C) the central bank would have to reduce interest rates which would decrease output.
D) the central bank would have to reduce interest rates which would increase output.