Question

8. Which policy is associated with time inconsistency?

A. inflation targeting.
B. the Taylor rule.
C. money growth rules.

D. discretionary policy. E. the gold standard.

9. If real GDP is above potential (or natural level), then
A. wage rates will eventually fall and the short-run aggregate supply curve will shift left.

B. wage rates will eventually rise and the aggregate demand curve will shift left.
C. wage rates will eventually rise and the short-run aggregate supply curve will shift left.

D. wage rates will eventually fall and the short-run aggregate supply curve will shift right.

E. wage rates will eventually rise and the aggregate demand curve will shift right.

10. Suppose price level increases and all else is held constant. As a result money demand and nominal interest rate .

A. increases/increases
B. increases/decreases

C. decreases/increases

D. decreases/decreases

E. cannot be determined

Answer 1

Question 8.

Discretionary policy ( D)

Question 9.

Wage rates will eventually rise and the short-run aggregate supply curve will shift left (C)

Since due to higher production demand of labor increases and wages also increases. To attain the equilibrium supply will reduce to the point of potential GDP.

Question 10.

Increases , Increases (A)

If price level increases more money is required to purchase the same level of output. If money supply increases then it will results in increase in increased interest rates.