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Wage Set Process Quiz

The case for activist macroeconomic policy is weakened by which of the following considerations?

Implicit in the case for activist macroeconomic policy is the assumption that expectations about policy never change; that is, the activist argument does not allow for the possibility

If workers know that policy will be accommodating in the future, they will continue to push their wages up and the aggregate supply curve will keep on shifting inward. Thus, the accommodating, activist policy with its high employment target

If workers’ opinions about whether policy is accommodating or nonaccommodating matter to the wage-setting process, then

If workers’ opinions about whether policy is accommodating or nonaccommodating matter to the wage-setting process, then

Nonactivists believe that a discretionary policy that reacts to excessive unemployment is counterproductive, because

If expectations about policy affect how wages are set, then the case for a(n) _____ policy is much stronger.

If expectations matter to the wage-setting process, then

The advantage of a credible, nonaccommodating policy is that while unemployment may be no higher than what could be achieved under an activist, accommodating policy,

Economists who believe that the government should avoid active discretionary policies to eliminate high unemployment whenever it develops

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