If Expectations Are "Rational," Can the Fed Control Unemployment

question 115

Multiple Choice

If expectations are "rational," can the Fed control unemployment?

• A)Yes, provided it announces policy in advance.
• B)Yes, if it affects the aggregate demand curve.
• C)No, because aggregate supply is vertical even in the short run.
• D)No, because only fiscal policy can affect unemployment.

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Definitions:

Referent Power

A form of influence based on the leader's appeal and charisma that inspires loyalty and admiration from followers.

Compliance

The act of following and adhering to rules, regulations, or requests established by authorities or organizations.

Coercive

Employing force or intimidation to obtain compliance or control over others.

Instrumental Compliance

Following rules or guidelines not out of agreement or belief but as a means to achieve a certain goal or reward.