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Which of the following views are consistent with the case for nondiscretionary
macroeconomic policy?
A) Even with time lags, discretionary policy moves the economy to full employment before the
economy's self-correcting mechanism would.
B) The wage and price adjustment process being extremely slow, a nondiscretionary policy
results in a large loss of output.
C) Workers will come to expect expansionary policies whenever the economy moves below full
employment.
D) A discretionary, accommodating policy of shifting the aggregate demand curve will produce
less volatility in both the price level and output due to the short time it takes to shift aggregate
demand.
Answer: C
Diff: 2 Type: MC Page Ref: 628
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
If expectations about policy affect how wages are set, then the case for a(n) ____ policy
is much stronger.
A) discretionary
B) nondiscretionary
C) interventionist
D) stabilization
Answer: B
Diff: 2 Type: MC Page Ref: 622
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
Evidence indicating that the wage and price adjustment process is extremely slow would
strengthen the case for ____.
A) nondiscretionary policy
B) a constant-money-growth-rate rule
C) discretionary policy
D) None of the above
Answer: C
Diff: 2 Type: MC Page Ref: 622
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates