If the basket of goods and services used to calculate the CPI cost $200 in the reference base period and $450 in a later year, the CPI for the latter year equals

If a positive inflation shock occurs and monetary policymakers do not change the inflation target:

A. output will eventually rise above potential output while inflation will equal the inflation target. B. output will eventually return to potential output but inflation will exceed the inflation target. C. output will eventually fall below potential output while inflation will equal the inflation target. D. output will eventually return to potential output and inflation will equal the inflation target.

If real money demand doubles while the nominal money supply is unchanged, what happens to the price level?

A. The price level increases by a factor of four. B. The price level is unchanged. C. The price level doubles. D. The price level falls by one-half.