Map sapling learning Label each of the following statements as either \"True\" o
ID: 1197126 • Letter: M
Question
Map sapling learning Label each of the following statements as either "True" or "False" Classical macroeconomists believed that unemployment could be kept low only through monetary policy free of political influence True False False cretionary fiscal policy is the preferred method of economic stabilization by modern macroeconomists since it avoids the risk of a political business cycle True Originally, monetarists believed that, since the velocity of money was stable in the short run, the best way to assure economic growth was to gradually and consistently increase the money supply False The key result of real business cycle theory is that the primary driver of the business cycle is the expectations of business owners since these expectations will affect their decisions, resulting to real economic impacts. False The political business cycle captures the relationship between the political party in office and the growth rate of the economy. False Previous 8 Give Up & View Solution Check Answer e Next Exit HintExplanation / Answer
1. False- Classical macroeconomics does not consider any existence of unemployment. It is a full employment situation and the market operates under the act of invisible hand. Thus no monetary or fiscal policy does matter.
2. True- As Discretionary fiscal expenditures are changes in government spending and taxation that need specific approval from Congress and the President.. Automatic stabilizers, on the other hand, do not need government approval and take effect immediately. Thus the government in ruling would always want to avoid any downfall. And hence can use discretionary fiscal policy to avoid any political business cycle.
3. False- Monetarists originally thought that, with constantcy of velocity of money , any increase in money supply would increase price level.The primary objective of the monetarists were to control the price level. They have proposed the idea of Money growth rule , which can be explained as the government should control the rate of growth of money in such a way that it equals real GDP , keeping price level unchanged.
4. False- Expectations of all the economic agents impacts their decision making, and thus Real Business Cycle operates. Thus not only business owners are participators in the real business cylce .