With Regard to the Effectiveness of Stabilization Policies,the New Classical

question 56

Multiple Choice

With regard to the effectiveness of stabilization policies,the new classical macroeconomists conclude that

• A) the price level is fixed, so government stabilization efforts are unnecessary.
• B) only unexpected changes in the price level will induce changes in national output.
• C) traditional demand-based stabilization policies work effectively if the money supply is fixed.
• D) firms and individuals do not formulate expectations rationally, so government must step in.
• E) money wage adjustments lag behind nominal adjustments, requiring the Fed to expand credit.

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Definitions:

Formal Procedures

Established and officially sanctioned methods and processes used to accomplish tasks or solve problems.

Uncertainty Avoidance

A cultural dimension that describes the extent to which societies tolerate ambiguity and unpredictability.

Autocratic Political System

A form of government where power is concentrated in the hands of a single ruler or a small elite.

Democratic System

A form of government in which power is vested in the people, who rule either directly or through freely elected representatives.