Assume That the Democrats Always Had a Policy of High

question 56

Multiple Choice

Assume that the Democrats always had a policy of high money growth while the Republicans followed a policy of low money growth, and the economy had a standard Phillips curve. Then, if the two parties took regular terms in office:

• A) there would be no political business cycle, but inflation would be higher under the Democrats.
• B) there would be no political business cycle, but inflation would be higher under the Republicans.
• C) unemployment would be lower under the Democrats but inflation would be higher.
• D) both unemployment and inflation would be higher under the Democrats.

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