Identify each of the following statements as true or false E

Identify each of the following statements as “true” or “false”. Explain your response. Macroeconomists today agree

a. that laws requiring a balanced budget can do more harm than good.

b. that fiscal policy is just as effective as monetary policy.

c. that the economy can be slow to self-correct.

d. that a liquidity trap can render monetary policy ineffective.

Solution

A true. It leds to inflation and can\'t handle boom and depression

B false. Monetarists do not hold this view.

C true. To avoid this they prescribe govt intervention. Invisible hand does not work effectively

D true. People consider bond prices will fall and hence hold all increase in money supply as cash