Part II : True or False ? Give your JUSTIFICATION WHY.
1. Wage indexation is a good mechanism to fight inflation induced by either demand or supply shocks.
2. With high responsiveness of investment to interest rate and low sensitivity of speculative money demand to interest rate, the monetary policy is more efficient than fiscal pol.
3. In the case of adverse supply shocks, the real wage will decrease when the output returns to the full-employment level (4).