Suppose that the Fed announces a low-money-growth policy to control inflation and workers sign low-wage contracts as a result. If instead, the Fed had implemented a high-money-growth policy, which of the following would not occur?
a. The unemployment rate would increase.
b. The Fed's stated policy would be time inconsistent.
c. The unemployment rate would be less than the natural rate.
d. The Fed would not achieve credibility through its actions.
e. The rate of inflation would be higher than expected.
Question 2
An increase in price will cause a firm's total revenue to increase if demand is price elastic.
a. True
b. False
Indicate whether the statement is true or false
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