Given the expected price level, policies for reaching potential ...

[Hungry!]

Given the expected price level, policies for reaching potential GDP will work best if the money supply is:
 a. large, so that prices at potential GDP are below expectations and people can afford to buy enough goods to support the natural level of employment.
  b. large enough, so that prices at potential GDP are above expectations and firms can afford to hire workers.
  c. small, so that prices at potential GDP are below expectations and people can afford to buy enough goods to support the natural level of employment.
  d. small, so that prices at potential GDP are above expectations and firms can afford to hire the workers.
 e. exactly the size that makes prices equal to the prices people expected to prevail.

Question 2

The time-inconsistency problem is likely to arise in Cadmia if _____.
 a. attempts are made to coordinate monetary policy with fiscal policy
 b. there is a lag between the announcement of a monetary policy and its implementation
 c. policy makers initially aim to keep the price level stable but do not follow through as promised
  d. policy makers do not allow enough time for a new policy to take effect
 e. there is a deep conflict among monetary policy makers

[TheNamesImani]

Answer to Question 1

e

Answer to Question 2

c