For each of the following policies indicate whether the policy is i) a monetary

Question

For each of the following policies indicate whether the policy is i) a monetary or a fiscal policy, ii) an active or a passive policy, and iii) a policy by rules or with discretion:
a. the central bank follows a policy of allowing the money supply to grow at a constant 4 percent per year





b. a government follows a policy of keeping government spending over a calendar year equal to government revenue over the calendar year





c. the central bank uses judgment to adjust the growth of the money supply based on expectations of what will happen to output and inflation over the next five years





d. the government keeps tax laws unchanging and allows government spending to change, depending on which spending bills are passed by the legislature





e. the central bank follows a policy of adjusting the money supply according to a formula based on deviations of unemployment from the natural rate of unemployment.

Explanation / Answer

d. the government keeps tax laws unchanging and allows government spending to change, depending on which spending bills are passed by the legislature

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