Suppose the Output Gap Is Zero,and Policy Makers Wish to Reduce

question 57

Multiple Choice

Suppose the output gap is zero,and policy makers wish to reduce the inflation rate from 10 percent to 5 percent.Which of these policies seems best?

• A)contractionary policies to reduce output at least 5 percent below potential output
• B)a convincing declaration of the inflation rate target,so that expected inflation falls to 5 percent
• C)no policy action;inflation will fall on its own,eventually
• D)no policy action;inflation will converge to its long-run rate,regardless of policy
• E)price and wage controls to counteract their stickiness

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Definitions:

Theory of Personality

A systematic approach to understanding the differences and characteristics that make up an individual's personality.

Rep Test

The Role Construct Repertory Test, a psychological test used to assess an individual's personal construct system.

Personal Constructs

Theory positing that individuals interpret the world and phenomena through a system of personal constructs, which are dichotomous mental representations.

Possible Selves

The various identities an individual imagines they might become, which can include hopes, fears, goals, and expectations for the future.