Place “MON,” “RET,” or “MAIN” beside the statements that most closely reflflect monetarist, rational expectations, or mainstream views, respectively:a. Anticipated changes in aggregate demand affect only the price level; they have no effect on real output.b. Downward wage inflexibility means that declines in aggregate demand can cause long-lasting recession.c. Changes in the money supply M increase PQ; at first only Q rises because nominal wages are fixed, but once workers adapt their expectations to new realities, P rises and Q returns to its former level.d. Fiscal and monetary policies smooth out the business cycle.e. The Fed should increase the money supply at a fixed annual rate.
Place “MON,” “RET,” or “MAIN” beside the statements that most closely reflflect monetarist, rational expectations, or mainstream views, respectively:
a. Anticipated changes in aggregate
b. Downward wage inflexibility means that declines in aggregate demand can cause long-lasting recession.
c. Changes in the money supply M increase PQ; at first only Q rises because nominal wages are fixed, but once workers adapt their expectations to new realities, P rises and Q returns to its former level.
d. Fiscal and
e. The Fed should increase the money supply at a fixed annual rate.
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