True or False:
1. Activist economists believe that discretionary macroeconomic policy can make the economy less unstable.
2. Most economists think that unemployment will remain close to the natural rate of unemployment in the short run.
3. Real business cycle theorists agree with rational expectations economists that wages and prices are flexible and that markets adjust quickly to economic shocks.
4. For many economists, monetary policy’s shorter outside lag is an advantage in using monetary policy for stabilization efforts.
5. If monetary authorities respond to political pressures during a recession, the result could be a decrease in interest rates and a decrease in unemployment in the short run, but higher inflation in the long run.
6. One of the advantages of monetary policy rules is to increase the Federal Reserve System’s credibility in its fight against inflation.
7. Monetary policy rules have the advantage of giving the Fed discretion to deal with sudden shocks and crises.
8. An example of indexing is an escalator clause, linking wage rates to a cost-of-living measure.
9. Some economists oppose widespread indexing on the grounds that it could worsen inflation.
10. As a practical matter, indexing can only be used with wage contracts.