According to the Monetarists, Deliberate Government Intervention

question 3

Multiple Choice

According to the monetarists, deliberate government intervention:

• A)will stabilize the economy if the money supply is increased during recessions and decreased during expansions.
• B)will effectively reduce the unemployment rate below its natural rate.
• C)will stabilize the economy if the money supply is reduced during recessions and increased during expansions.
• D)will destabilize the economy only if the government uses fiscal policy to change equilibrium income.
• E)will destabilize the economy and cause a business cycle of its own, regardless of whether fiscal or monetary policy is used.

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Definitions:

Divergent Thinking

A thought process or method used to generate creative ideas by exploring many possible solutions.

Fixedness

A cognitive bias that limits a person to using an object only in the way it is traditionally used.

Heuristics

Mental shortcuts or rules of thumb that simplify decision making and problem solving, although not always perfectly accurate.

Creativity

The ability to produce original and unusual ideas, or to make something new or imaginative.