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Advocates of nondiscretionary policy emphasize the importance of a constant money growth
rate rule more than the balanced-budget amendment or restrictions on union power because
____.
A) they regard excessive money growth as the cause of inflation
B) they believe that excessive government spending, not excessive monetary growth, is the cause
of inflation
C) they believe that while unions cause inflation, they are too politically powerful to deal with
D) they regard high tax rates as the cause of inflation
Answer: A
Diff: 2 Type: MC Page Ref: 628
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
Advocates of nondiscretionary policy contend that a policy of shifting the aggregate demand
curve will be costly because it produces more volatility in both the price level and output. Thus
they favor ____.
A) a policy of variable money supply growth
B) supply-side policy
C) demand-management policy
D) a constant-money-growth-rate rule
Answer: D
Diff: 2 Type: MC Page Ref: 624
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
A credible, nonaccommodating policy rule has the ____ that it makes a cost-push by
workers ____ likely and thus helps to reduce the output loss from controlling inflation.
A) advantage; less
B) advantage; more
C) disadvantage; less
D) disadvantage; more
Answer: A
Diff: 2 Type: MC Page Ref: 624
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates