Assume That the Liberal Party Always Had a Policy of High

question 21

Multiple Choice

Assume that the Liberal party always had a policy of high money growth while the Conservative party followed a policy of low money growth, and the economy had a standard Phillips curve. Then, if the two parties took regular terms in office:

• A)there would be no political business cycle, but inflation would be higher under the Liberal party.
• B)there would be no political business cycle, but inflation would be higher under the Conservative party.
• C)unemployment would be lower under the Liberal party, but inflation would be higher.
• D)both unemployment and inflation would be higher under the Liberal party.

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