the economics of money, banking, and financial markets

836 $

© 2014 Pearson Canada Inc.$

7. 
   

   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

   
   


8. 
   

   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

   
   


9. 
   

   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