Suppose, Under the Imperfect-Information Model, That a Stimulative Monetary Policy

question 19

Multiple Choice

Suppose, under the imperfect-information model, that a stimulative monetary policy is enacted in an attempt to increase real GDP. Its effectiveness is larger

• A) the more firms expect the stimulus to increase relative prices.
• B) the more firms expect the stimulus to increase output.
• C) the smaller the resulting variation in price expectations.
• D) a and c only.
• E) none of the above.

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