Which statement about policy lags is TRUE?A.Fiscal policy has a longer inside lag and monetary policy has a longer outside lag.B.Fiscal policy has a shorter inside lag and monetary policy has a shorter outside lag.C.Fiscal policy has a longer inside lag, but the outside lag is the same for both fiscal and monetary policy.D.Fiscal policy and monetary policy have the same inside lag, but monetary policy has a longer outside lag.

Monetary policy is considered time-inconsistent becauseA) of the lag times associated with the implementation of monetary policy and its effect onthe economy.B) policymakers are tempted to pursue discretionary policy that is more contractionary in theshort run.C) policymakers are tempted to pursue discretionary policy that is more expansionary in theshort run.D) of the lag times associated with the recognition of a potential economic problem and theimplementation of monetary policy.

Monetary policy is easier to conduct than fiscal policy becausemultiple choicemonetary policy is easier to understand.monetary policy has a much shorter administrative lag than fiscal policy.the Fed has more control of the economy.the economy responds better to monetary policy than fiscal policy.

The government of a country decided to adopt a new monetary policy to stimulate economic growth. They decided to cut interest rates and increase public spending by the government. According to these policy measures, which of the following statements is true?

Assume that because of a long policy lag, the government starts implementing expansionary monetary policy too late, i.e., at a time when the economy is already healing itself. As a result, the economy will probably move from an initialGroup of answer choicesrecessionary gap to an even deeper recessionary gap.a recessionary gap to an inflationary gap.inflationary gap to the natural level of Real GDP.inflationary gap to a recessionary gap.

Which of the following statements is correct?Group of answer choicesA steepening of the yield curve could reflect a belief that the central bank will in the future conduct a more contractionary monetary policy than previously thoughtA flattening of the yield curve could reflect long-term government bonds suddenly being seen as a less attractive investmentThe yield curve reflects the effect of arbitrage in financial markets as well as what the current interest rate is in the overnight marketThe first and third alternatives above are both correct statements while the second alternative is an incorrect statement.