The policy irrelevance proposition states that


The policy irrelevance proposition states that O A. in the short run unanticipated changes in monetary policy are ineffective
Suppose the natural rate of unemployment is 4 percent. If the actual unemployment rate is 4 percent, then the cyclical unempl
The short-run Phillips curve relationship implies that the inflation rate O A. is constant regardless of the actual unemploym
The Federal Reserve is anticipating a contractionary period in the economy. The Fed decides to engage in open market operatio

Answer

1. Option d. As the theory says that anticipated or expected changes in monetory policy are ineffective in changing the real GDP. 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.

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