Question

PLEASE ANSWER ALL QUESTIONS!!

1. The time inconsistency of policy implies that
Select one:
a. when people expect that inflation will be low, it is harder for the Fed to increase output by increasing the money supply.

b. what policymakers say they will do is usually not what they do, but people believe them anyway.

c. what policymakers say they will do is generally what they will do, but people don't believe them because of current policy.

d. people will believe Fed policy will be more inflationary than the Fed claims.

2. When aggregate demand is too low to ensure full employment, those in favor of using monetary and fiscal policy to stabilize the economy might recommend
Select one:
a. raising taxes.

b. cutting government spending.

c. having the Fed purchase government bonds.

d. reducing the money supply.

3. Which of the following is true of stimulus policy enacted in 2009?
Select one:
a. We can not be sure that it reduced the severity of the recession, but the recession was less severe than the Great Depression.

b. We can be sure that it reduced the severity of the recession because the recession was less severe than the Great Depression.

c. We can not be sure that it reduced the severity of the recession because the recession was more severe than the Great Depression.

d. We can be sure that it reduced the severity of the recession even though the recession was more severe than the Great Depression.

Answer 1

As we know that, policy making plays an important role in an econnomy. The policy makers makes the policy for the overall benefit of the people, if the policies are against the people they are highly criticized than. Time inconsistency will cause the short run Philips curve to be higher than otherwise.

1). The correct option is (c).

what policymakers say they will do is generally what they will do, but people don't believe them because of current policy.

2). The correct option is (d).

Reducing money supply.

The proponents of monetary and fiscal policy recommends to control the supply of money in order to control the higher rates of inflation in the econnomy.

3). The correct option is (a).

We can not be sure that it reduced the severity of the recession, but the recession was less severe than the Great Depression.

The great depression was much severe than the recession of 2008. The great depression starts in 1929 and lasts till 1939.

Hope you got the answer.

Kindly comment for further explanation.

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