Q: Consider two policies—a tax cut that will last for only
Consider two policies—a tax cut that will last for only one year and a tax cut that is expected to be permanent. Which policy will stimulate greater spending by consumers? Which policy will have the g...
See AnswerQ: Suppose that survey measures of consumer confidence indicate a wave of pessimism
Suppose that survey measures of consumer confidence indicate a wave of pessimism is sweeping the country. If policymakers do nothing, what will happen to aggregate demand? What should the Fed do if it...
See AnswerQ: Advocates of the theory of rational expectations believe that a.
Advocates of the theory of rational expectations believe that a. the sacrifice ratio can be much smaller if policymakers make a credible commitment to low inflation. b. if disinflation catches people...
See AnswerQ: Suppose the economy is in a long-run equilibrium.
Suppose the economy is in a long-run equilibrium. a. Draw the economy’s short-run and long-run Phillips curves. b. Suppose a wave of business pessimism reduces aggregate demand. Show the effect of thi...
See AnswerQ: Suppose a drought destroys farm crops and drives up the price of
Suppose a drought destroys farm crops and drives up the price of food. What is the effect on the short-run trade-off between inflation and unemployment?
See AnswerQ: What is the sacrifice ratio? How might the credibility of the
What is the sacrifice ratio? How might the credibility of the Fed’s commitment to reduce inflation affect the sacrifice ratio?
See AnswerQ: Which of the following is NOT an argument for maintaining a positive
Which of the following is NOT an argument for maintaining a positive rate of inflation? a. It permits real interest rates to be negative. b. It allows real wages to fall without cuts in nominal wages....
See AnswerQ: Chapter 2 explains the difference between positive analysis and normative analysis.
Chapter 2 explains the difference between positive analysis and normative analysis. In the debate about whether the central bank should aim for zero inflation, which areas of disagreement involve posi...
See AnswerQ: Explain how credibility might affect the cost of reducing inflation.
Explain how credibility might affect the cost of reducing inflation.
See AnswerQ: Explain the costs and benefits of reducing inflation to zero. Which
Explain the costs and benefits of reducing inflation to zero. Which are temporary and which are permanent?
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