The Gibson Paradox shows that:
a. Central banks face a paradox when they want to stimulate their economies because consumers may not spend the newly created money.
b. When monetary policy is loose and expected inflation rises, the nominal interest rate rises rather than falls.
c. When fiscal policy is loose (i.e., high government spending and falling tax rates), society as a whole is more willing (not less willing) to give up consumption today for consumption in the future.
d. When expected inflation rises, nominal interest rates fall rather than rise.
e. When expected inflation falls, government spending tends to increase, rather than decrease, as is frequently assumed.
Question 2 - Which procedure seems to be most useful to structure a macroeconomic analysis?
a. (1) Analyze the chain reaction of economic causes and effects; (2) Identify the economic shock; (3) Describe the economic setting in the three key markets.
b. (1) Analyze the chain reaction of economic causes and effects; (2) Describe the economic setting in the three key markets; (3) Identify the economic shock.
c. (1) Identify the economic shock; (2) Analyze the chain reaction of economic causes and effects; (3) Describe the economic setting in the three key markets.
d. (1) Identify the economic shock; (2) Describe the economic setting in the three key markets; (3) Analyze the chain reaction of economic causes and effects.
e. (1) Describe the economic setting in the three key markets; (2) Identify the economic shock; (3) Analyze the chain reaction of economic causes and effects.
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