Arguments for adopting a policy rule include
A) the time-inconsistency problem can lead to poor economic outcomes.
B) discretionary policies pursue overly expansionary monetary policies to boost employment in the short run but generate higher inflation in the long run.
C) policy makers and politicians cannot be trusted.
D) all of the above.
D
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In Zealand, banks' desired reserve ratio is 20 percent and there is no currency drain. The money multiplier equals ________
A) 0.50 B) 0.20 C) 20.0 D) 5.0
Answer the following questions true (T) or false (F)
1. An increase in government spending increases the supply of money in our economy. 2. An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes. 3. If real equilibrium GDP is above potential GDP, expansionary fiscal policy should be pursued.