A. A cut in income tax rates tends to _________ aggregate demand and _________ aggregate supply.

a. increase; increase

b. increase; decrease

c. decrease; increase

d. decrease; decrease

B. Advocates for setting monetary policy by rule rather than discretion often argue that

a. central bankers with discretion are tempted to renege on their announced commitments to low

inflation.

b. central bankers following a rule will be more responsive to the needs of the political process.

c. fiscal policy is better than monetary policy as a tool for economic stabilization.

d. it is sometimes