To Close an Inflationary Gap, the Great Moderation Consensus on Macroeconomics

question 69

Multiple Choice

To close an inflationary gap, the Great Moderation consensus on macroeconomics suggests that:

• A) a close coordination of fiscal and monetary policy is crucial.
• B) the automatic fiscal stabilizers are powerful enough to bring the economy back to equilibrium.
• C) policy makers should wait until a negative productivity shock brings the economy back to equilibrium.
• D) monetary policy should take the leading role in economic stabilization.

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Definitions:

Significant Influence

The power to participate in the financial and operating policy decisions of an investee, but not control them entirely, typically associated with ownership of 20% to 50% of voting stock.

Held-to-maturity Debt Securities

Investments in bonds or other debt securities that a company intends and is able to hold until they mature.

Current Assets

Short-term financial resources a company holds, including cash, marketable securities, receivables, and inventory, which are expected to be converted into cash within a year.

Foreign Exchange Rate

Foreign Exchange Rate is the price at which one currency can be exchanged for another currency, which can fluctuate based on market conditions.