The policy irrelevance proposition states that O A. in the short run unanticipated changes in monetary policy are ineffective in changing real Gross Domestic Product (GDP) OB. only relatively large expected changes in monetary policy impact the economy O c. only statements from the White House have impact on the economy OD. anticipated changes in monetary policy are ineffective in changing real Gross Domestic Product (GDP)
Suppose the natural rate of unemployment is 4 percent. If the actual unemployment rate is 4 percent, then the cyclical unemployment rate is O A. Cannot be determined given the information OB. 4 percent OC. O percent OD. 8 porcent
The short-run Phillips curve relationship implies that the inflation rate O A. is constant regardless of the actual unemployment rate. OB. is higher when the actual unemployment rate is lower OC. is higher when the actual unemployment rate is also higher OD. is higher when the natural unemployment rate is also higher
The Federal Reserve is anticipating a contractionary period in the economy. The Fed decides to engage in open market operations to stimulate the economy This action is OA. passive policymaking OB. active policymaking O the monetary rule OD. Phillips policymaking
1. Option d. As the theory says that anticipated or expected
changes in monetory policy are ineffective in changing the real
Rest other options are therefore incorrect.
2. As we know that when natural rate of unemployment is equal to
actual rate of unemployment, then the country real GDP is equal to
potential GDP. And the cyclical unemployment is equal to zero.
Therefore, as given Natural rate is equal to actual rate of
unemployment is equal to 4. Therefore, option c is correct.
3. For short run, in Phillips curve, inflation is inversely
proportional to the unemployment. So as per this, option b is
correct. That is, inflation rate is higher when actual unemployment
rate is lower.
4. In open market operations, federal bank buys or sells
government securities based on the demand of the economy to make
changes to money supply. Thus, this is active policymaking. Option
b is correct.