ps10ans - ECON 205: PRINCIPLES OF MACROECONOMICS FALL 2008...

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ECON 205: PRINCIPLES OF MACROECONOMICS FALL 2008 MARK MOORE PROBLEM SET 10 1. a. Strengthens the argument for rules. b. Probably strengthens the argument for discretion. c. Probably strengthens the argument for rules, but there is some uncertainty. On the one hand, the difficulty of making coherent policy in a timely way makes discretionary policy more difficult to implement, and probably creates uncertainty in the private sector about the likely course of policy. On other hand, the differing political opinions may make for more moderate policies that avoid extreme policy mistakes (but also aggressive policy successes). 2. If the AS is relatively flat, shifts in the AD curve have relatively larger effects on output and unemployment, and relatively smaller effects on the inflation. Hence, stabilization policies (i.e., monetary and fiscal policy measures that affect the AD curve) to fight unemployment look more attractive. If the AS curve is relatively steep, stabilization policies that fight inflation look more attractive. 3.
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This note was uploaded on 06/17/2009 for the course ECON 20091_ECO taught by Professor Mohammadsafarzadeh during the Fall '09 term at USC.

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ps10ans - ECON 205: PRINCIPLES OF MACROECONOMICS FALL 2008...

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