Deck 16: The Policy Debate: Active or Passive

Question 1

The figure below shows the relationship between an economy's potential output,price level,and real GDP.According to those who favor a passive approach to policy,the economy will attain equilibrium at potential output when:

A)the short-run aggregate supply curve shifts to the left.
B)the short-run aggregate supply curve shifts to the right due to a fall in real wages.
C)either the money supply or government spending is increased.
D)either the money supply or government spending is decreased.
E)aggregate demand is decreased.

Answer 1

the short-run aggregate supply curve shifts to the right due to a fall in real wages.

Question 2

When self-correction works to eliminate an expansionary gap,_____.

A)both money wages and real wages increase
B)money wages increase while real wages decrease
C)both money wages and real wages decrease
D)money wages decrease while real wages increase
E)money wages remain unchanged

Answer 2

money wages increase while real wages decrease

Question 3

An economy experiencing an expansionary gap:

A)operates in an environment in which labor shortages drive up money wages,real wages,and prices.
B)has an excess supply of labor due to rising money wages and prices.
C)will self-correct as rising money wages decrease faster than rising prices.
D)will experience rising money wages and prices but falling real wages.
E)will have excessive involuntary unemployment.

Answer 3

operates in an environment in which labor shortages drive up money wages,real wages,and prices.

Question 4

The reason why self-correction works to close a recessionary gap is because:

A)a labor shortage causes wages to increase.
B)a labor surplus causes wages to increase.
C)a labor shortage causes wages to fall.
D)a labor surplus causes wages to fall.
E)a labor surplus causes price to fall.

Question 5

In the event of a recession,which of the following is the most likely policy stance of those who advocate a passive approach to economic policy?

A)Cutting taxes
B)Increasing government spending
C)Reducing interest rates
D)Increasing the money supply
E)Doing nothing

Question 6

If we observe an economy adjusting to potential GDP as prices fall and real output increases,we can conclude that _____.

A)the economy was experiencing an expansionary gap
B)there is a labor surplus
C)the economy was experiencing a recessionary gap
D)self-correction is not the process that is occurring
E)there are widespread labor shortages

Question 7

For those who favor an active approach,public policy changes are necessary to cure a recessionary gap because:

A)the short-run aggregate supply curve will otherwise shift quickly to the right.
B)prices and wages are flexible downward but not upward.
C)the required decrease in output can be achieved only by shifting the aggregate demand curve.
D)real wages must fall in order to increase aggregate supply in the economy.
E)falling money wages will cause the AD curve to shift leftward unless policy counters this movement.

Question 8

According to the active policy approach,the elimination of a recessionary policy _____.

A)can only be achieved by decreasing wages
B)requires a public policy of wage and price controls
C)should be accomplished by stimulating aggregate demand
D)will increase unemployment
E)will cause a recession

Question 9

The figure below shows the price level,real GDP,and the potential output for an economy.According to those who favor an active approach to policy,once the expansionary gap is eliminated,the economy can attain equilibrium at:
​

A)point A.
B)point B.
C)point C.
D)a point above point A on the SRAS curve.
E)at a point below point C on the SRAS curve.

Question 10

Which of the following is a difference between an active approach to close a recessionary gap and a passive approach to close a recessionary gap?

A)The level of real GDP would be higher in the long run with the active approach,while it will be lower with the passive approach.
B)The level of real GDP would be lower in the long run with the active approach,while it will be higher with the passive approach.
C)The price level would be higher and the level of real GDP would be lower in the long run with the active approach,whereas the price level would be lower and real GDP level would be higher with the passive approach.
D)Only the price level would be lower in the long run with the active approach,whereas it would be higher with the passive approach.
E)Only the price level would be higher in the long run with the active approach,whereas it would be lower with the passive approach.

Question 11

If a passive approach is followed in closing an expansionary gap,_____.

A)restrictive fiscal policy would be used
B)restrictive monetary policy would be used
C)the short-run aggregate supply curve would shift to the right
D)the price level would decrease in the long run
E)an economy would experience inflationary pressure

Question 12

The figure below shows the price level,real GDP,and the potential output for an economy.According to those who favor an active approach to policy,the economy can attain equilibrium at potential output if:

A)the SRAS curve shifts to the left.
B)the SRAS curve shifts to the right.
C)money supply is increased.
D)government spending is decreased.
E)aggregate demand increases.

Question 13

If an active approach is followed in closing an expansionary gap,_____.

A)the aggregate demand curve would shift rightward
B)the aggregate demand curve would shift leftward
C)the short-run aggregate supply curve would shift rightward
D)the short-run aggregate supply curve would shift leftward
E)there would be a movement up and to the left along the short-run supply curve

Question 14

If an economy's actual GDP exceeds its potential GDP,_____.

A)wages and prices must fall
B)self-correcting forces will shift the SRAS curve to the left
C)self-correcting forces will shift the AD curve to the left
D)inflation will occur when AD shifts to the left
E)unemployment is likely to be unusually high

Question 15

If the price level in an economy rises and its output level decreases as it gravitates toward its potential GDP,then:

A)a policy to manipulate the aggregate supply is being used.
B)an active approach to correcting a recessionary gap is being used.
C)an active approach to correcting an expansionary gap is being used.
D)a passive approach to correcting a recessionary gap is being used.
E)a passive approach to correcting an expansionary gap is being used.

Question 16

The figure below shows the relationship between an economy's potential output,price level,and real GDP.According to those who favor an active approach to policy,the economy will end up at _____when it attains the potential output level.

A)point A
B)point B
C)point C
D)a point between A and B
E)a point between A and C

Question 17

The figure below shows the price level,real GDP,and the potential output for an economy.According to those who favor a passive approach to policy,once the expansionary gap is eliminated,the economy will end up at:

A)point A.
B)point B.
C)point C.
D)a point to the right of point A.
E)a point below C.

Question 18

The figure below shows the price level,real GDP,and the potential output for an economy.According to those who favor a passive approach to policy,the economy will attain equilibrium at potential output when:

A)the SRAS curve will shift to the left.
B)the SRAS curve will shift to the right.
C)either the money supply or government spending is increased.
D)the money supply is decreased.
E)aggregate demand will decrease.

Question 19

Which of the following is consistent with an active approach to policy?

A)The natural rate of unemployment being uncertain
B)Wages and prices being relatively quick to adjust
C)The short-run aggregate supply curve being slow to shift in the presence of a recessionary gap
D)The size of the multiplier being irrelevant
E)The aggregate demand curve being slow to shift in the presence of a recessionary gap

Question 20

Which of the following is not consistent with a self-correcting economy?

A)Falling wages that correct a recessionary gap
B)Falling prices that correct a recessionary gap
C)Rising prices that correct an expansionary gap
D)Tendency of the short-run aggregate supply to shift until it intersects aggregate demand at potential GDP
E)An active approach to a recession or depression

Question 21

The time it takes for a new policy to register its full impact on the economy after it has been put in force is known as the_____.

A)activity lag
B)decision-making lag
C)effectiveness lag
D)implementation lag
E)recognition lag

Question 22

Suppose policy makers are concerned about a shortage of long-term capital investment.To remedy the problem,various plans to cut capital gains taxes have been suggested.The delay in picking a plan is called the _____.

A)implementation lag
B)policy coordination problem
C)decision-making lag
D)recognition lag
E)effectiveness lag

Question 23

The time it takes to identify and examine the nature and seriousness of an economic problem is the _____.

A)activity lag
B)decision-making lag
C)effectiveness lag
D)implementation lag
E)recognition lag

Question 24

The time it takes for the Fed's purchase of government securities to ultimately change aggregate demand is called the _____.

A)recognition lag
B)implementation lag
C)effectiveness lag
D)decision-making lag
E)self-correction lag

Question 25

Suppose a recession surprises economic forecasters who did not see it coming.This is an example of a _____.

A)cyclical lag
B)recognition lag
C)decision-making lag
D)implementation lag
E)effectiveness lag

Question 26

Long time lags hamper the effectiveness of economic policy because:

A)people don't want to wait for economic recovery.
B)the longer unemployment lasts,the more intense inflation becomes.
C)by the time the impact of a policy is felt,a new problem may have come along that requires a different policy,which may make the economic situation even worse.
D)if inflation is allowed to continue for too long,it becomes immune to policy interference.
E)if unemployment is allowed to continue for too long,it becomes immune to policy interference.

Question 27

Those who favor a passive approach to policy believe that:

A)discretionary monetary policy can be used to help the economy since monetary policy lags are short.
B)discretionary fiscal policy can be used to help the economy since fiscal policy lags are short.
C)lags associated with implementing policies are too long and unstable for discretionary policy to be effective.
D)despite the lags involved,implementing discretionary policy is preferable to inaction.
E)automatic stabilizers cannot be used to help the economy since monetary policy lags are short.

Question 28

If the short-run equilibrium output of the United States exceeds the potential output,the Fed:

A)employs an active monetary policy to close a recessionary gap.
B)employs an active monetary policy to close an expansionary gap.
C)relies on a passive approach to close a recessionary gap.
D)relies on a passive approach to close an expansionary gap.
E)employs an expansionary fiscal policy.

Question 29

Which of the following pairs of lags are typically shorter for monetary policy than for fiscal policy?

A)The recognition lag and the implementation lag
B)The effectiveness lag and the decision-making lag
C)The decision-making lag and the implementation lag
D)The implementation lag and the effectiveness lag
E)The recognition lag and the effectiveness lag

Question 30

Which of the following lags reduces the effectiveness of active policy?

A)Preliminary lag
B)Accounting lag
C)Self-correction lag
D)Recognition lag
E)Execution lag

Question 31

The selection of a new policy takes place during a period of time known as the _____.

A)activity lag
B)decision-making lag
C)effectiveness lag
D)implementation lag
E)recognition lag

Question 32

The country of Glassen has experienced an expansionary gap for the last three years.The advocates of passive policy are likely to suggest a policy which causes _____.

A)the short-run aggregate supply to shift to the left.
B)the short-run aggregate supply to shift to the right.
C)rising prices to shift the aggregate demand to the left.
D)wages to fall relatively quickly.
E)aggregate demand to shift to the right as wages increase.

Question 33

An implementation lag is the time it takes:

A)for policy makers to decide what to do.
B)for the chosen policy to have its full impact on the economy.
C)to identify trouble in the economy and to assess its severity.
D)to put a selected policy into action.
E)before a policy's effects on the economy are noticed by ordinary people.

Question 34

The _____ lag is typically longer for fiscal policy than monetary policy.

A)supply
B)cyclical
C)effectiveness
D)implementation
E)recognition

Question 35

Which of the following is true of lags associated with discretionary policy?

A)Such lags extend only from the time a problem occurs in the economy through the time it is recognized by the government.
B)Such lags extend only from the time a problem is recognized by the government through the time an agreed-on policy is approved of.
C)Such lags extend only from the time a policy is approved through the time the policy is implemented.
D)Such lags can be reduced by taxation.
E)Such lags extend only from the time a problem occurs in the economy through the time a corrective policy has an impact on the economy.

Question 36

During inflation,the optimal discretionary fiscal policy would be _____.

A)to decrease taxes
B)to increase government spending
C)to decrease the reserve ratio
D)to increase taxes
E)to decrease the market interest rate

Question 37

After World War II the average U.S.recession has lasted:

A)a few months.
B)about half a year.
C)a little less than a year.
D)about three weeks.
E)about two years.

Question 38

The time required _____ is not a time lag associated with using discretionary policy to correct an economic problem.

A)to recognize the problem
B)to decide how to handle the problem
C)to set a policy change in action
D)for a policy to affect economic variables
E)to observe public reaction after a policy announcement is made

Question 39

Those who favor a passive approach to policy often argue that changes in prices and wages will shift the:

A)short-run aggregate supply curve before active policy shifts the aggregate demand curve.
B)short-run aggregate supply curve only after active policy shifts the aggregate demand curve.
C)short-run aggregate supply curve more than active policy shifts the aggregate demand curve.
D)short-run aggregate supply curve less than active policy shifts the aggregate demand curve.
E)short-run aggregate supply curve in a direction opposite the shift in the aggregate demand curve

Question 40

Policy makers may not know that the economy is in a recession until six months after the recession starts;this phenomenon is known as the _____.

A)implementation lag
B)policy coordination problem
C)decision-making lag
D)recognition lag
E)effectiveness lag

Question 41

Those who favor an active approach to policy believe that:

A)discretionary monetary policy cannot be used to help the economy since monetary policy lags are long.
B)discretionary fiscal policy cannot be used to help the economy since fiscal policy lags are long.
C)lags associated with implementing policies are too long and unstable for discretionary policy to be effective.
D)despite the lags involved,implementing discretionary policy is preferable to inaction.
E)the discretionary fiscal policy cannot be used to help the economy since it leads to inflation.

Question 42

The time-inconsistency problem is likely to arise in Cadmia if _____.

A)attempts are made to coordinate monetary policy with fiscal policy
B)there is a lag between the announcement of a monetary policy and its implementation
C)policy makers initially aim to keep the price level stable but do not follow through as promised
D)policy makers do not allow enough time for a new policy to take effect
E)there is a deep conflict among monetary policy makers

Question 43

_____,the time-inconsistency problem gets eliminated.

A)When an inflation or a recession is correctly anticipated
B)When lags associated with monetary and fiscal policy are extremely short
C)When discretionary macro policy is replaced with fixed policy rules which are well publicized
D)When expectations about the economy adjust very slowly
E)When the price level in an economy adjusts over time with changes in aggregate demand

Question 44

Which of the following macroeconomic variables is most dependent on whether the government pursues an active approach to policy or a passive approach to policy?

A)Aggregate supply
B)Aggregate demand
C)Money demand
D)Money supply
E)Interest rate

Question 45

If the time for an economy to self-correct is shorter than the active policy lags,then:

A)active policy should be strengthened.
B)active policy is likely to destabilize the economy.
C)time is required to accumulate evidence that the economy is performing below its potential.
D)the aggregate demand curve shifts more rapidly than the short-run aggregate supply curve.
E)active policy will work better than passive policy.

Question 46

Passive policy advocates rely on the economy's natural ability to correct itself in case of unemployment because of:

A)the lack of any real concern for those who have no jobs.
B)the conviction that unemployment is relatively harmless.
C)the belief that active economic policy is likely to be either ineffective or harmful.
D)the desire to await further economic data before intervening.
E)the belief in the law of diminishing returns.

Question 47

Economists of the rational expectations school believe that expansionary monetary policy is fully effective only if:

A)the policy is anticipated by workers and firms.
B)it causes the aggregate supply curve to shift to the left.
C)the economy is operating at or above its potential output level.
D)policy makers follow through on their previously announced plans.
E)the policy is totally unexpected.

Question 48

An effective policy of governmental intervention in the economy requires all of the following except one.Which is the exception?

A)The will to reject sound policy if it gets in the way of political considerations
B)The ability to estimate the economy's potential level of output
C)The ability to predict what would happen without intervention
D)An assortment of effective tools of discretionary policy
E)The ability to achieve effective cooperation between fiscal and monetary policy makers

Question 49

According to the rational expectations school,people base their expectations about inflation on:

A)the announcement of a change in policy.
B)weighted averages of previous inflation rates,with the most distant getting the heaviest weight.
C)all information available to them.
D)changes in monetary policy only.
E)changes in both monetary and fiscal policy.

Question 50

According to the rational expectations school,_____.

A)on average people have very little idea of what to expect from government policy makers
B)people form expectations by focusing only on the private sector
C)changes in the expected price level shift the aggregate demand curve
D)people do not consider likely government policies when forming expectations,choosing to remain rationally ignorant
E)people form expectations,in part,by considering the probable future actions of government policy makers

Question 51

Which of the following statements supports the passive approach to close a recessionary gap?

A)It is likely that policies will be subject to time lags.
B)Prolonged unemployment may cause the economy's potential real GDP to fall.
C)Workers' skills may grow rusty during a prolonged recession.
D)It is likely that unemployed workers will drop out of the labor force.
E)Firms may neglect their capital stock during a prolonged recession.

Question 52

Which of the following is not a valid criticism of discretionary fiscal policy?

A)The implementation of fiscal policy is sometimes difficult.
B)Time lags in fiscal policy are long.
C)Fiscal policy works only during periods of stagflation.
D)Fiscal policy often affects only current income,but many economic decisions are made on the basis of permanent income.
E)Fiscal policy might have undesirable long-term effects on aggregate supply.

Question 53

Discretionary policy advocates believe:

A)that there is a high cost associated with the use of a discretionary policy.
B)that self-corrective forces in an economy work slowly.
C)that natural adjustments of wages and prices can help attain potential output.
D)in rational expectations.
E)that an active stabilization policy imposes troubling fluctuations in the price level and real GDP.

Question 54

Given the expected price level,policies for reaching potential GDP will work best if the money supply is:

A)large,so that prices at potential GDP are below expectations and people can afford to buy enough goods to support the natural level of employment.
B)large enough,so that prices at potential GDP are above expectations and firms can afford to hire workers.
C)small,so that prices at potential GDP are below expectations and people can afford to buy enough goods to support the natural level of employment.
D)small,so that prices at potential GDP are above expectations and firms can afford to hire the workers.
E)exactly the size that makes prices equal to the prices people expected to prevail.

Question 55

Which of the following is an outcome of prolonged unemployment?

A)An improvement in labor skills
B)An increase in the inflation rate
C)A rise in potential GDP
D)A fall in potential GDP
E)An increase in the size of the labor force

Question 56

Which of the following is true about rational expectations?

A)People form expectations on the basis of information about past as well as future actions of policy makers.
B)Wage agreements do not reflect inflationary expectations if workers expect continued inflation.
C)Rational people cannot easily anticipate the effects of discretionary policy on the price level and output.
D)The role of expectations is applicable in the context of monetary policy only.
E)The effectiveness of a particular government policy is independent of people's expectations.

Question 57

Brandon,an economist,is a believer of the rational expectations school.According to him,which of the following is likely to affect the levels of output and employment in an economy?

A)An expansionary monetary policy,if it is fully anticipated
B)A recessionary monetary policy,if it is fully anticipated
C)A monetary policy that is unanticipated
D)A fiscal policy that is anticipated
E)The Fed's announcement of no change in monetary policy

Question 58

If the price level increases more rapidly than expected,_____.

A)output will decrease
B)output will increase
C)output will not change
D)real wages will increase
E)unemployment will increase

Question 59

If an economy is at potential GDP and an expansionary policy is correctly anticipated,the result will be:

A)a short-run fall in output and employment.
B)little or no increase in GDP.
C)an increase in wages along with a dramatic fall in the price level.
D)a rapidly expanding economy.
E)a severe recession.

Question 60

Which of the following is a problem associated with an active policy such as a stimulus package?

A)Increase in the unemployment rate
B)Increase in inflationary pressure
C)Increase in the market interest rate
D)Decrease in the market interest rate
E)Decrease in money demand

Question 61

An anti-inflation policy that involves announcing and executing tough measures to stop inflation is called _____.

A)cold turkey
B)red tape
C)a pork-barrel policy
D)chokehold
E)time-inconsistency

Question 62

Which of the following central banks does not have an explicit inflation target?

A)The Bank of England
B)The Federal Reserve
C)Swiss National Bank
D)European Central Bank
E)The Reserve Bank of India

Question 63

Which of the following is not assumed before the implementation of a policy?

A)The appropriate policy is selected instantaneously.
B)The appropriate policy is implemented instantaneously.
C)Once implemented,the policy works as advertised.
D)The policy,once implemented,works in no time.
E)Lags that reduce the effectiveness of the policy are predictable.

Question 64

For an economy to eliminate inflation once people have begun to anticipate it,_____.

A)a passive policy approach must be followed
B)the monetary authorities must announce their decisions
C)actual inflation must be greater than anticipated inflation
D)cold turkey solutions that lead to further inflation must be avoided
E)a recession will have to be endured until expectations have been reduced

Question 65

Which of the following is true of the Fed?

A)The law lets the Fed decide how best to promote full employment and output in the U.S.economy.
B)It relies heavily on Congressional appropriations.
C)The president sits on the Board of Governors.
D)Congress must approve any new monetary policy.
E)The president must approve any new monetary policy.

Question 66

According to economists of the rational expectations school,_____.

A)the passive approach must be adopted because they believe the economy is too complex
B)individual forecasts about policies can never be right
C)anticipated monetary policy can affect the output level
D)discretionary policy can stabilize the economy
E)discretionary policy should be completely avoided

Question 67

According to the rational expectations school,a correctly anticipated expansionary monetary policy will:

A)increase prices and real output.
B)increase real output only in the short run.
C)have no effect on prices or real output.
D)decrease prices and real output.
E)lead only to a higher price level.

Question 68

The government of Montesia had announced that it would keep its money supply unchanged in 2010.However,in 2011,the money supply increased,thereby ruining public expectations.This led to:

A)no problem;this is normal behavior.
B)policy credibility.
C)a time-inconsistency problem.
D)the development of rational expectations.
E)an anticipation about the monetary policy.

Question 69

According to the rational expectations school,if the Fed announces a policy of rapid growth in the money supply,but then puts the brakes on money expansion without any announcement,which of the following is likely to be the short-run result?

A)An unexpected surge in aggregate demand
B)An unexpected drop in aggregate demand.
C)An anticipated surge in aggregate demand.
D)An anticipated drop in aggregate demand.
E)No change in aggregate demand.

Question 70

Opponents of inflation targets believe that:

A)such targets will encourage workers to shirk work.
B)such targets will lead to unsustainable economic growth.
C)such targets will lead the Fed to pay less attention to jobs and economic growth.
D)such targets will cause international competitiveness to be lost and the value of savings to be reduced.
E)such targets would prevent investors from investing in profitable ventures.

Question 71

Which of the following is likely to dampen economic fluctuations in a country?

A)A regressive income tax
B)An increase in tax rates
C)A decrease in tax rates
D)An increase in money supply
E)Unemployment insurance

Question 72

Opponents of inflation targets say that:

A)such targets encourage workers to expect a low and stable inflation rate and hold down demands for wage increases.
B)the Fed pays less attention to jobs and economic growth when it sets such targets.
C)such targets encourage firms to plan on a low and stable inflation rate and hold down price increases.
D)such targets encourage investors to plan on a low and stable inflation rate and hold down demands for interest rate increases.
E)the Fed pays more attention to jobs and economic growth when it sets such targets.

Question 73

The rational expectations school advocates:

A)Monetarism.
B)Keynesianism.
C)the use of fiscal policy.
D)the use of monetary policy.
E)a passive approach to policy.

Question 74

If resource owners anticipated a monetary growth rate of 6 percent,but the money supply actually grew at only 2 percent,then:

A)real wages would fall.
B)output would decrease.
C)output would increase.
D)output would increase,but only if nominal wages were increased more rapidly than prices.
E)the expected inflation rate was less than the actual rate.

Question 75

According to the rational expectations theory,monetary policy is fully anticipated and therefore only affects:

A)the level of real GDP.
B)t​he level of real investment.
C)the price level.
D)the level of real consumption.
E)the level of exports.

Question 76

Some economists believe that when workers and firms expect a recessionary monetary policy,_____.

A)they act so as to prevent the price level from increasing
B)their actions lead to a further increase in output
C)they are likely to negotiate for relatively lower wages.
D)the monetary authority is forced to cancel its planned recessionary policy
E)both output and employment increase even more than was originally planned

Question 77

The theorists of the rational expectations school:

A)favor monetary rules because they believe individuals know too little about how the economy works.
B)favor monetary rules so that workers and firms do not get any unanticipated surprises from the Fed.
C)are those who favor an "active approach" to policy and reject monetary rules.
D)oppose any monetary rules because they believe rules impede the natural self-correcting mechanism of the economy.
E)do not believe in implementing discretionary policies.

Question 78

Suppose the Fed announced a policy of rapid growth in the money supply in 2004,but then put the brakes on money expansion without any announcement.If in 2005,Fed officials announce again that an expansion is planned,it is most likely that:

A)people will believe in the announcement since the conditions that created a need for the expansion are probably still in effect.
B)people will believe in the announcement since they consider that having failed to implement the expansion previously,the Fed still plans to do so.
C)people will not believe in the announcement since they consider that the conditions that created a need for the expansion must have changed in the meantime.
D)people will not believe in the announcement since they consider that having failed to implement the expansion previously,the Fed will probably fail again
E)there will be further uncertainty about the Fed following through on the policies it announces.

Question 79

Ms.Jones is a professor at a university.She strongly supports the rational expectations theory.She is likely to believe that the only time active policy has an impact on aggregate output is when:

A)an expansionary policy is implemented.
B)a recessionary policy is implemented.
C)policy changes are unannounced.
D)the economy has a recessionary gap.
E)the economy has an expansionary gap.

Question 80

The main policy conclusion of the rational expectations school is that:

A)fiscal policy lags are so long and variable that such policy is worthless,but monetary policy can be helpful.
B)monetary policy lags are so long and variable that such policy is worthless,but fiscal policy can be helpful.
C)both monetary and fiscal policy can be helpful if policy makers correctly anticipate the plans of firms and households.
D)both monetary and fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers.
E)neither monetary nor fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers.