Suppose Congress Raises Taxes and the Monetary Authorities Slow the Annual

Multiple Choice

Suppose Congress raises taxes and the monetary authorities slow the annual money supply growth from 10 percent to 5 percent. If decision makers accurately anticipate the impact of these policy changes on prices,

A) unemployment will rise.
B) unemployment will fall.
C) there will be no effect on unemployment.
D) unemployment will fall if the change in monetary policy dominates, but unemployment will rise if the change in fiscal policy dominates.