Both 1 and 2

1 only

2 only

Neither 1 nor 2

They assume the production function shifts upwards whenever the stock of physical capital increases.

They suggest that if the level of investment is higher than depreciation, then there could be sustained growth.

They are called endogenous growth theories.

They argue that increasing the saving ratio will have only a temporary effect on output per worker.

Simply wait for the labour market to return output to the potential level.

Apply a contractionary fiscal policy.

Announce a credible zero target for inflation.

Apply a supply-side policy to shift LAS to the right?

Governments might use them in a way which leads to political business cycles.

Discretionary fiscal policies may act too late.

Discretionary monetary policies lose any power that a rules policy has to hold inflationary expectations down.

They need to be announced in advance.

The interest rate.

The rate of growth of the money stock.

The current inflation rate.

The expected inflation rate in two years’ time.