What Did Friedman and Phelps Argue About the Effectiveness of Monetary

question 189

Multiple Choice

What did Friedman and Phelps argue about the effectiveness of monetary policies?

• A) As long as people's inflation expectations were fixed, an increase in the money supply growth rate could not change output in the short or long run.
• B) If people's inflation expectations were fixed, in the short run, a decrease in the money supply growth rate could raise output and unemployment.
• C) When the money supply growth rate changed, people would eventually revise their inflation expectations so that any change in unemployment created by an increase in the money supply growth rate would be temporary.
• D) When the money supply growth rate changes, people slowly adjust their inflation expectations; therefore, the unemployment rate changes only in the long run but not in the short run.

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Definitions:

Subjective theory

A perspective emphasizing the importance of personal perspectives and feelings in interpreting events, as opposed to objective facts.

Universal justification

A philosophical concept proposing that certain principles or reasons for actions are universally applicable and can be justified across different contexts.

Moral values

Fundamental beliefs about what is right and wrong or good and bad, often influencing behavior and decision-making.

Moral reasoning

The process through which individuals make decisions about what is right and wrong, guided by ethical principles and personal values.