Economic Analysis Suggests That Countercyclical Macro-Policy Will

question 56

Multiple Choice

Economic analysis suggests that countercyclical macro-policy will

• A) be difficult to time properly because of uncertainty about the future direction of the economy.
• B) be difficult to implement because we do not know whether monetary policy is transmitted through the interest rate, or whether it affects aggregate demand directly.
• C) reduce the natural rate of unemployment when macro-policy is persistently expansionary.
• D) help reduce economic instability if, and only if, we are willing to tolerate double-digit inflation.