Consider the Following Events: Event 1: Growth in the World

Multiple Choice

Consider the following events: Event 1: Growth in the world economy slows.
Event 2: The world price of oil rises.
Event 3: Canadian labour productivity declines.
Choose the statement that is correct.

A) A classical macroeconomist and a monetarist recommend that taxes be kept low to avoid disincentive effects for all of the events and a Keynesian recommends active fiscal policy and monetary policy to offset all events.
B) All macroeconomists believe that the economy requires active fiscal policy and monetary policy to keep the economy out of recession.
C) A classical macroeconomist and a monetarist recommend an increase in the quantity of money for all events.
D) A Keynesian recommends no action for all of the events.
E) A Keynesian recommends active fiscal policy but not monetary policy for events 1 and 2 and monetary policy but not fiscal policy for event 3.