The Great Moderation Consensus Regarding the Use of Monetary or Fiscal

question 88

Multiple Choice

The Great Moderation consensus regarding the use of monetary or fiscal policy to reduce unemployment in the long run is that:

• A) unemployment can be constantly decreased as long as expectations of inflation are kept low.
• B) the natural rate of unemployment limits what monetary and fiscal policy can accomplish.
• C) the concept of the nonaccelerating inflation rate of unemployment, or NAIRU, was a mistake.
• D) the only effective policy is to maintain a constant growth rate of the money supply.

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Definitions:

Trade or Business

An activity conducted for the purpose of earning income from selling goods or services, characterized by regularity and continuity.

Depreciation

The accounting process of allocating the cost of a tangible asset over its useful life, representing the decrease in value of the asset over time.

Section 1231

Refers to a tax provision in the United States that includes the tax treatment of gains and losses on the sale or exchange of real or depreciable property used in a trade or business and held for more than one year.

Ordinary Asset

An asset used in a business or trade which is subject to ordinary income tax rates rather than capital gains tax rates if sold or exchanged.