Refer to Table 16.2 for the following questions.
Table 16.2

-Consider the hypothetical information in Table 16.2 for potential GDP,real GDP and the price level in 2012 and in 2013 if the Reserve Bank of Australia does not use monetary policy.If the RBA uses monetary policy successfully to keep real GDP at its potential level in 2013,which of the following will be lower than if the RBA had taken no action?

Question

Refer to Table 16.2 for the following questions.
Table 16.2
 
-Consider the hypothetical information in Table 16.2 for potential GDP,real GDP and the price level in 2012 and in 2013 if the Reserve Bank of Australia does not use monetary policy.If the RBA uses monetary policy successfully to keep real GDP at its potential level in 2013,which of the following will be lower than if the RBA had taken no action?

Quizplus · Accepted Answer

If the RBA uses monetary policy successfully to keep real GDP at its potential level in 2013, the inflation rate will be lower than if the RBA had taken no action. Therefore, the best choice is B, as real GDP will be the same in both cases, and potential GDP cannot be affected by monetary policy in the short run. However, the inflation rate will be lower with monetary policy, since the RBA can influence it by adjusting interest rates and the money supply.

Refer to Table 16.2 for the Following Questions