If Only Unanticipated Changes in the Money Supply Affect Real

question 94

Multiple Choice

If only unanticipated changes in the money supply affect real GDP, the public has rational expectations, and everyone has the same information about the state of the economy, then:

• A) monetary policy can be used to systematically stabilize output.
• B) monetary policy cannot be used to systematically stabilize output.
• C) a policy of keeping the money supply constant is optimal.
• D) a policy of adjusting the money supply in response to the state of the economy is optimal.

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Definitions:

Mass Production

The manufacturing of large quantities of standardized products, often using assembly lines or automated technology.

Competitive Advantage

A condition or position that allows a company or country to produce goods or services of equal value at a lower price or in a more desirable fashion than competitors.

Continuous-process Production

A manufacturing process that produces goods continuously, often over multiple shifts, to increase efficiency and output.

Labour Force

The total number of people available to work, including both the employed and the unemployed.