1.By the time Paul Volcker took office as the new Federal Reserve chairman in 1979, both the inflation and unemployment rates were higher than during most of the 1950s, 60s and early 70s. The Federal Reserve implemented an autonomous tightening of monetary policy that resulted in the famousVolker Disinflationwhich was successful in bringing both problems under control. What would have been a likely long-run result had Mr. Volker conducted an expansionary monetary policy instead?

A) Eventually, inflation would have been made worse and unemployment would not have been fixed

B) Eventually, both the inflation and unemployment rates would have declined

C) Eventually, inflation would have been fixed and unemployment would have been made worse D) There would have been no effect on the unemployment and inflation rates

E) none of the above

2.If consumers suddenly became more optimistic ________. A) they would spend more at any given inflation rate

B) planned expenditures would decline

C) the aggregate demand curve would shift to the left

D) all of the above E) none of the above

3.The aggregate demand curve shifts to the left when there is ________. A) autonomous tightening of monetary policy

B) an increase in the nominal interest rate

C) an increase in inflation

D) all of the above E) none of the above