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It may be necessary to cut the deficit as part of a credible anti-inflationary policy because the
public knows that large deficits ____.
A) are inflationary by themselves in the long run
B) create inefficiencies
C) put pressure on the Bank of Canada to expand the money supply to keep interest rates from
rising
D) put pressure on the Bank of Canada to contract the money supply to prevent employment
from rising
Answer: C
Diff: 2 Type: MC Page Ref: 632
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
By ____ its deficit, the government's credibility of anti-inflationary policy ____.
A) not changing; remains the same
B) reducing; increases
C) reducing; decreases
D) not changing; increases
Answer: B
Diff: 2 Type: MC Page Ref: 632
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
By ____ its deficit, the government makes an anti-inflationary policy ____
credible.
A) increasing; more
B) reducing; more
C) reducing; less
D) not changing; more
Answer: B
Diff: 2 Type: MC Page Ref: 632
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
An example of a nominal anchor is ____.
A) the inflation rate
B) the real interest rate
C) government purchases
D) the tax rate
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