In the New Keynesian open economy model, suppose the exchange rate is flexible and there is a decline in total factor productivity
A) expansionary fiscal policy is necessary.
B) contractionary monetary policy is necessary.
C) expansionary monetary policy is necessary.
D) no policy intervention is necessary.
B
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When a Pigouvian tax is imposed, ________
A) the marginal private cost curve shifts upward B) the demand curve shifts rightward C) the marginal social cost curve shifts downward D) the marginal social benefit curve shifts downward
The spread between the interest rates on Baa corporate bonds and U.S. government bonds is very large during the Great Depression years 1930-1933. Explain this difference using the bond supply and demand analysis
What will be an ideal response?
If expected inflation rises, monetary policy ________
A) is rendered ineffective B) must be tightened, to prevent further increases in inflation and expected inflation C) will prevent any increase in the real interest rate D) is designed to increase the nominal interest rate by more than the increase in expected inflation E) none of the above
A perfect-price-discriminating monopoly maximizes social welfare as measured by the sum of producer surplus plus consumer surplus
Indicate whether the statement is true or false