Question Details

These two factors would typically cause producers to 



1. "The central bank warned about a possible 'collision' in the future between rising wages and prices and its hold-the-line monetary policy." The result of this collision will be 
a) rising inflation b) rising unemployment c) falling interest rates d) falling deficits 
2. "We're not likely to see a really tight monetary policy; he made clear that the central bank is following an 'intentionally moderate' monetary policy in order to 'minimize the strains involved in adjusting to a less inflationary economy.' He points to the 'awkward economic fact that in the short run anti-inflationary policies tend to restrain output more than prices'." In plain language this means that the central bank is adopting a policy of 85 
a) raising interest rates markedly to cut back on output 
b) gradually reducing the rate of growth of the money supply 
c) attacking unemployment with a policy of gradually increasing the money growth rate 
d) increasing the money supply at a low steady rate equal approximately to the real rate of growth of the economy. 
3. "People widely believe that there is a correlation between higher interest rates and capital inflows, but this belief is as false as the once accepted belief that there is a correlation between unemployment and inflation, causing the one to go up when the other goes down. These correlations don't stand up to scientific research." The correlation between unemployment and inflation doesn't exist because 
a) the short-run Phillips curve can shift 
b) in the long run any level of inflation is compatible with the NRU 
c) movements away from and back to the NRU can both be associated with rising inflation 
d) all of the above 
4. "She said that there is no evidence we are suffering from either high inventory stocks or a sharp inflationary spike, the two factors that typically cause a major recession." These two factors would typically cause producers to 
a) decrease output and the Fed to decrease the money supply 
b) decrease output and the Fed to increase the money supply 
c) increase output and the Fed to decrease the money supply 
d) increase output and the Fed to increase the money supply 
"Just as in the '30s when government intervened to save capitalism from itself, so again must it intervene massively now to save government capitalism from itself. Since government now protects individuals and corporations from the consequences of excessive wage and price increases, government must now prevent those excessive increases by permanent wage and price controls." 
5. Government protects individuals and corporations from excessive wage and price increases through 
a) lower taxes b) social safety nets 
c) unemployment insurance d) monetary accommodation 
6. Wage and price controls could succeed in preventing these excessive increases if they 
a) were seen to be permanent b) had very high penalties for violation 
c) were accompanied by low interest rates 
d) were accompanied by low money supply growth



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