If you were a rational expectations economist, you would argue that the goal for economic policy is to
a. discover the NAIRU and make sure the actual rate of unemployment doesn't fallbelow it
b. discover a way to lower unemployment to two percent without inflation
c. keep the inflation rate below 10 percent
d. maintain inflation at 3 percent and unemployment at 4 percent
e. maintain unemployment at 3 percent and inflation at 4 percent
A
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All of the following might create problems from financial liberalization in emerging countries EXCEPT
A) ineffective screening of borrowers. B) limits on risk-taking. C) lax government supervision of banks. D) lenders failure to monitor borrowers.
Sound economic policy is policy that is consistent with
a. good intentions. b. quick action and frequent policy changes until positive results are achieved. c. monetary stability, free trade, and low tax rates. d. saving jobs, protecting domestic industry, and increasing tax revenue.
Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP price index and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The GDP Price Index rises, and nominal value of the domestic currency falls. b. The GDP Price Index falls, and nominal value of the domestic currency rises. c. The GDP Price Index falls, and nominal value of the domestic currency falls. d. There is not enough information to determine what happens to these two macroeconomic variables. e. The GDP Price Index rises, and nominal value of the domestic currency remains the same.
According to the life-cycle theory of consumption, people tend to consume ________ they earn during their early and later years.
A. less than B. the same as C. more than D. an amount unrelated to what