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:

Liver

A large, vital organ in the body that performs numerous functions including detoxification, protein synthesis, and the production of biochemicals necessary for digestion.

Liver

A large, vital organ in vertebrates that performs a wide range of functions, including detoxification, protein synthesis, and production of biochemicals necessary for digestion.

Lobes

Divisions or sections of an organ, separated by fissures or boundaries, often found in the brain, lungs, and liver.

Lingual Frenulum

The lingual frenulum is a small fold of mucous membrane that extends from the floor of the mouth to the midline of the underside of the tongue, aiding in the movement of the tongue.