If Prices (And Wages) Are Flexible and All Policy Changes

question 56

True/False

If prices (and wages) are flexible and all policy changes are anticipated, there is no distinction between the long run and the short run.

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Definitions:

Federal Funds Rate

The interest rate at which banks lend reserve balances to other banks overnight, on an uncollateralized basis.

Discount Rate

The interest rate charged by central banks for short-term loans to commercial banks.

Chinese Government

The political leadership and governing bodies of the People's Republic of China, comprising the Communist Party, the state institutions, and the military.

Liquidity Trap

At very low interest rates, said John Maynard Keynes, people will neither lend out their money nor put it in the bank, but will simply hold it.