If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment, which of the following would be most appropriate?
a. A larger budget deficit and the purchase of securities in the open market by the Fed
b. A government surplus and the sale of securities in the open market by the Fed
c. A larger government deficit and an increase in the discount rate
d. A larger government surplus and a reduction in the discount rate
Question 2
Suppose workers expect the inflation rate to be 3.6 percent and they receive a nominal wage increase of 7.5 percent. If the actual inflation rate turns out to be 2.8 percent, workers will receive a lower real wage than expected.
a. True
b. False
Indicate whether the statement is true or false
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