In the FriedmanLucas money surprise model, suppose that the
central bank wants to reduce the price...
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Economics
In the FriedmanLucas money surprise model, suppose that the
central bank wants to reduce the price level. Suppose the central
bank has two options: (i) announce in advance that the money supply
will decrease; (ii) surprise the public with a decrease in the
money supply. Which option is preferable? Choose the option that
best describes the correct conclusion and reasoning.Choice 1 of 4:
Option (i) is preferable because it decreases the price level,
whereas option (ii) increases it.Choice 2 of 4: Option (ii) is
preferable because it decreases the price level, whereas option (i)
does not affect the price levelChoice 3 of 4: Option (i) is
preferable because the decrease in the price level under option (i)
will be greater than that under option (ii), and option (ii)
involves a decrease in outputChoice 4 of 4: Option (ii) is
preferable because the decrease in the price level under option
(ii) will be greater than that under option (i), and option (i)
involves a decrease in output
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