13. Fine-tuning the economy involves: a. the Laissez-faire policy favored by Cla

Question

13. Fine-tuning the economy involves: a. the Laissez-faire policy favored by Classical economists b. contractionary monetary policy only c. expansionary monetary policy only d. making small adjustments in monetary and fiscal policy as necessary e. non-activist monetary policy f. non-activist fiscal policy 14. Inflation Targeting requires: a. tax policy changes b. Federal Reserve intervention c. a return to the gold standard d. a pre-determined acceptable inflation range e. Both band d f. None of the above 15. A natural disaster, such as a hurricane in Florida, will probably: a. Raise the price of orange juice b. Shift the supply curve of oranges to the left c. Raise the aggregate demand for oranges d. Shift the demand curve for oranges to the left e. Both a and hb f. None of the above

Explanation / Answer

Q13) option d

Fine tuning imply the process of adjustment to bring equilibrium in economy , for which adjustments in both monetary & fiscal policy may be required

Q14) option e

Inflation targeting imply making adjustments in money supply & interest rates to achieve a set target of inflation rate in Economy.

By such adjustments & intervention, inflation rate is allowed to move within a given band only

With the federal reserve intervention, money supply & hence interest rates are adjusted to achieve target inflation rate

Q15) option e

Since supply will be affected due to disaster, so demand being unchanged, so price rises & so supply curve shifts to left.

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