Can a Keynesian still believe in an active counter-cyclical policy if she adopts the assumption of rational expectations?
A) No, it destroys the case for active policy.
B) Yes, so long as she continues to assume wage and price rigidity.
C) Yes, if she also adopts the assumption of wage and price flexibility.
D) Yes, if she assumes that economic policy shifts are anticipated in advance.
B
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Suppose Stan transfers $1,000 from his checking account into a savings account. What are the effects on M1 and M2 money supply?
A) M1 increases; M2 decreases. B) M1 decreases; M2 remains the same. C) Both M1 and M2 increase. D) Both M1 and M2 decrease. E) Both M1 and M2 remain the same.
Which of the following describes the medium-of-exchange function of money?
A) noting that Audible.com sells downloadable audio books for $10 per book B) making a monthly payment toward your car loan C) paying $30 for a haircut D) putting away $50 each month into your savings account