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The U.S. government can play an important role in establishing the credibility of anti-inflation
policy by ____.
A) demonstrating fiscal responsibility
B) monitoring the Fed
C) conducting fiscal policy
D) all of the above
Answer: A
Diff: 2 Type: MC Page Ref: 627 - 628
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
If aggregate output is below the natural rate level, advocates of discretionary policy would
recommend that the government ____.
A) do nothing
B) try to eliminate the high unemployment by attempting to shift the aggregate supply curve to
the right
C) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to
the right
D) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to
the left
Answer: C
Diff: 2 Type: MC Page Ref: 625
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
When expectations of inflation are formed rationally, an anti-inflationary policy will be more
successful if it is ____.
A) credible
B) a surprise
C) unanticipated
D) announced
Answer: A
Diff: 2 Type: MC Page Ref: 625
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates