In recent years, the Fed has chosen to target interest rates rather than the money supply because
a. Congress passed a law requiring them to do so.
b. the President requested them to do so.
c. the money supply is hard to measure with sufficient precision.
d. changes in the interest rate change aggregate demand, but changes in the money supply do not.
c
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The rational expectations theory indicates that expansionary policy will:
a. stimulate real output in the long run but not in the short run. b. expand real output and employment if the public quickly anticipates the effects of the expansionary policy. c. equalize real and nominal interest rates during lengthy periods of inflation. d. fail to increase employment because individuals will anticipate it and take actions that will offset its impact.
Which expression below matches most closely the way economists go about testing their models?
A) "Consistency is the hobgoblin of small minds." B) "Seeing the results is the only way to know if you are right." C) "A bird in the hand is worth two in the bush." D) "In the long run, we are all dead."