If Only Unanticipated Changes in the Money Supply Affect Real

question 94

Multiple Choice

If only unanticipated changes in the money supply affect real GDP, the public has rational expectations, and everyone has the same information about the state of the economy, then:

• A) monetary policy can be used to systematically stabilize output.
• B) monetary policy cannot be used to systematically stabilize output.
• C) a policy of keeping the money supply constant is optimal.
• D) a policy of adjusting the money supply in response to the state of the economy is optimal.

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Definitions:

Remedy of Damages

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Contract Law

The body of law that governs the formation, execution, and enforcement of agreements between parties.

Limitation

A restriction or bound; in legal terms, it refers to the maximum time period within which legal action can be initiated.

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