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1. Reductions in tax rates and regulation might help reduce both unemployment and inflation, which is the basic strategy of supply-side policies. 2. Keynesians would also cut taxes and regulations that raise production costs and lower import barriers that keep out cheaper foreign goods. 3. In the face of inflationary GDP gap, supply-siders would turn off the money spigot. The Fed's job in this situation isn't only to reduce money supply growth but to convince market participants that a more cautious monetary policy will be continued.

1. Reductions in tax rates and regulation might help reduce both unemployment and inflation, which is the basic strategy of supply-side policies. 2. Keynesians would also cut taxes and regulations that raise production costs and lower import barriers that keep out cheaper foreign goods. 3. In the face of inflationary GDP gap, supply-siders would turn off the money spigot. The Fed's job in this situation isn't only to reduce money supply growth but to convince market participants that a more cautious monetary policy will be continued.

Principles of Macroeconomics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Influence Of Monetary And Fiscal Policy On Aggregate Demand
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Write True/False for the statements below with explanation.
1. Reductions in tax rates and regulation might help reduce both unemployment and inflation, which is the basic strategy of supply-side policies. 2. Keynesians would also cut taxes and regulations that raise production costs and lower import barriers that keep out cheaper foreign goods. 3. In the face of inflationary GDP gap, supply-siders would turn off the money spigot. The Fed's job in this situation isn't only to reduce money supply growth but to convince market participants that a more cautious monetary policy will be continued.
Transcribed Image Text:1. Reductions in tax rates and regulation might help reduce both unemployment and inflation, which is the basic strategy of supply-side policies. 2. Keynesians would also cut taxes and regulations that raise production costs and lower import barriers that keep out cheaper foreign goods. 3. In the face of inflationary GDP gap, supply-siders would turn off the money spigot. The Fed's job in this situation isn't only to reduce money supply growth but to convince market participants that a more cautious monetary policy will be continued.
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