The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior

The monetary policy strategy that provides an automatic rule for the conduct of monetary policy is

A) exchange-rate targeting. B) monetary targeting. C) inflation targeting. D) the implicit nominal anchor.

When output is below potential and the policy rate has hit the floor of zero, if policymakers do nothing, output will ________ and inflation will ________

A) rise; fall B) fall; fall C) fall; rise D) rise; rise