Question 1

If interest rates rise,then velocity should ____ in the Keynesian model and _____ in the Monetarist model.

Accepted Answer

A) rise; fall. 
B) stay the same,stay the same. 
C) rise,stay the same. 
D) fall; rise. 
E) none of the above 
A) rise; fall. 
B) stay the same,stay the same. 
C) rise,stay the same. 
D) fall; rise. 
E) none of the above C

Question 2

Monetarists emphasize

Accepted Answer

A) crowding-out but not the liquidity trap. 
B) crowding-out and the liquidity trap. 
C) the liquidity trap but not crowding-out. 
D) neither crowding-out nor the liquidity trap. 
A) crowding-out but not the liquidity trap. 
B) crowding-out and the liquidity trap. 
C) the liquidity trap but not crowding-out. 
D) neither crowding-out nor the liquidity trap. A

Question 3

If the Fed followed through on plans to be more open to and more quickly provide the public with information about monetary policy,then we would expect to see

Accepted Answer

A) the impact of the money supply on output would get stronger. 
B) the Fed would not have any power over output in the future. 
C) the impact of the money supply on output would get weaker. 
D) information does not affect output. 
A) the impact of the money supply on output would get stronger. 
B) the Fed would not have any power over output in the future. 
C) the impact of the money supply on output would get weaker. 
D) information does not affect output. C

Question 4

If interest rates rise,what happens to the price of bonds on the secondary market? How does this fact affect the demand for money and velocity in the Monetarist and Keynesian models?

Accepted Answer

When interest rates rise,the value of pr

Question 5

Friedman and others view changes in velocity as the result of changes in

Accepted Answer

A) income. 
B) who is the chairman of the Federal Reserve. 
C) interest rates. 
D) inflation. 
A) income. 
B) who is the chairman of the Federal Reserve. 
C) interest rates. 
D) inflation.

Question 6

A monetarists would expect an increase in government spending to have a strong effect on output only if the spending increase was

Accepted Answer

A) financed by an increase in the money supply. 
B) financed by a sale of bonds. 
C) financed by an increase in taxes. 
D) accompanied by a higher in the deficit. 
A) financed by an increase in the money supply. 
B) financed by a sale of bonds. 
C) financed by an increase in taxes. 
D) accompanied by a higher in the deficit.

Question 7

Targeting money growth will lead to stable output growth only if

Accepted Answer

A) money demand and velocity change proportionally with output. 
B) fiscal policy remains unchanged. 
C) money demand and velocity are stable. 
D) the IS curve is steep. 
A) money demand and velocity change proportionally with output. 
B) fiscal policy remains unchanged. 
C) money demand and velocity are stable. 
D) the IS curve is steep.

Question 8

Monetarists believe in all of the following except

Accepted Answer

A) steady growth in inflation will yield stable output. 
B) steady growth in the money supply will yield stable output. 
C) fluctuations in the money supply are responsible for business cycles. 
D) the Fed should not be involved in trying to stabilize the economy. 
A) steady growth in inflation will yield stable output. 
B) steady growth in the money supply will yield stable output. 
C) fluctuations in the money supply are responsible for business cycles. 
D) the Fed should not be involved in trying to stabilize the economy.

Question 9

Compare and contrast the monetarist and Keynesian views to the inherent stability/instability of the economy.How do these views inform their opinions about the use of discretionary policy?

Accepted Answer

Monetarist see the economy as inherently

Question 10

According to the monetarist view,the

Accepted Answer

A) IS schedule is quite flat; hence,reflecting a high interest elasticity of aggregate demand. 
B) IS schedule is quite steep; hence,reflecting a high interest elasticity of aggregate demand. 
C) LM schedule is quite flat; hence,reflecting a high interest elasticity of money demand. 
D) IS schedule is almost vertical; hence,reflecting a very low interest elasticity of money demand. 
A) IS schedule is quite flat; hence,reflecting a high interest elasticity of aggregate demand. 
B) IS schedule is quite steep; hence,reflecting a high interest elasticity of aggregate demand. 
C) LM schedule is quite flat; hence,reflecting a high interest elasticity of money demand. 
D) IS schedule is almost vertical; hence,reflecting a very low interest elasticity of money demand.

Question 11

The difference between the monetarist and Keynesian views on discretionary monetary policy is that the monetarists

Accepted Answer

A) believe monetary policy is a stabilizing force and Keynesians believe it is primarily destabilizing. 
B) Keynesians think that monetary policy is always used effectively. 
C) believe monetary policy is a destabilizing force and Keynesians believe it is potentially stabilizing. 
D) favor "fine tuning" the economy by use of monetary policy while the Keynesians do not. 
A) believe monetary policy is a stabilizing force and Keynesians believe it is primarily destabilizing. 
B) Keynesians think that monetary policy is always used effectively. 
C) believe monetary policy is a destabilizing force and Keynesians believe it is potentially stabilizing. 
D) favor "fine tuning" the economy by use of monetary policy while the Keynesians do not.

Question 12

The Monetarist model differs from the classical model in that

Accepted Answer

A) changes in aggregate demand,not aggregate supply,drive changes in output. 
B) changes in the money supply drive changes in inflation inflation. 
C) changes in aggregate supply,not aggregate demand,drive changes in ouput. 
D) money demand is not always stable. 
E) none of the above. 
A) changes in aggregate demand,not aggregate supply,drive changes in output. 
B) changes in the money supply drive changes in inflation inflation. 
C) changes in aggregate supply,not aggregate demand,drive changes in ouput. 
D) money demand is not always stable. 
E) none of the above.

Question 13

Keynes and many of his contemporaries believed that money was

Accepted Answer

A) major importance because the idea of the liquidity trap only came later. 
B) even more important than fiscal policy. 
C) little importance and monetary policy of little use as a stabilization tool. 
D) major importance but of little use as a stabilization tool. 
E) none of the above. 
A) major importance because the idea of the liquidity trap only came later. 
B) even more important than fiscal policy. 
C) little importance and monetary policy of little use as a stabilization tool. 
D) major importance but of little use as a stabilization tool. 
E) none of the above.

Question 14

The monetarists would expect a tax cut to have a strong effect on output only if the spending increase was

Accepted Answer

A) financed by a sale of bonds. 
B) financed by a cut in government spending. 
C) financed by an increase in the money stock. 
D) accompanied by a reduction in the deficit. 
A) financed by a sale of bonds. 
B) financed by a cut in government spending. 
C) financed by an increase in the money stock. 
D) accompanied by a reduction in the deficit.

Question 15

During the Great Depression,the money supply fell by more than 25%.Explain this fact and the role it played in the Great Depression from the Monetarist and Keynesian perspectives.

Accepted Answer

Monetarists believe that this fall in th

Question 16

A liquidity trap is

Accepted Answer

A) the vertical portion of the LM schedule. 
B) the horizontal portion of the LM schedule. 
C) a situation where a given change in the money stock induces a large reduction in the interest rate. 
D) Both a and c 
E) Both b and c 
A) the vertical portion of the LM schedule. 
B) the horizontal portion of the LM schedule. 
C) a situation where a given change in the money stock induces a large reduction in the interest rate. 
D) Both a and c 
E) Both b and c

Question 17

In the modern Keynesian model,velocity

Accepted Answer

A) varies positively with the level of the interest rate but not with income. 
B) varies positively with the level of the interest rate and with income. 
C) is constant. 
D) varies in the short run but is constant in the long run. 
E) none of the above 
A) varies positively with the level of the interest rate but not with income. 
B) varies positively with the level of the interest rate and with income. 
C) is constant. 
D) varies in the short run but is constant in the long run. 
E) none of the above

Question 18

The monetarist explanations of the Great Depression focus on

Accepted Answer

A) falls in the LM curve and aggregate demand. 
B) falls in aggregate supply. 
C) fall in the IS curve and aggregate demand.. 
D) falls in expectations and the expected price level. 
A) falls in the LM curve and aggregate demand. 
B) falls in aggregate supply. 
C) fall in the IS curve and aggregate demand.. 
D) falls in expectations and the expected price level.

Question 19

Early Keynesians concluded that the quantity of money was not important because they assumed

Accepted Answer

A) low interest elasticity of money demand and high interest elasticity of the demand for output. 
B) high interest elasticity of money demand and low interest elasticity of the demand for output. 
C) high interest elasticity of money demand and high interest elasticity of the demand for output. 
D) both low interest elasticity of money demand and of the demand for output. 
A) low interest elasticity of money demand and high interest elasticity of the demand for output. 
B) high interest elasticity of money demand and low interest elasticity of the demand for output. 
C) high interest elasticity of money demand and high interest elasticity of the demand for output. 
D) both low interest elasticity of money demand and of the demand for output.

Question 20

Milton Friedman and others view the instability of velocity in the 1980s as the result of a number of one-time events during that decade.What were these events?

Accepted Answer

One of these events was the disinflation

If interest rates rise,then velocity should in the Keynesian model and _ in the Monetarist model.

Monetarists emphasize

If the Fed followed through on plans to be more open to and more quickly provide the public with information about monetary policy,then we would expect to see

If interest rates rise,what happens to the price of bonds on the secondary market? How does this fact affect the demand for money and velocity in the Monetarist and Keynesian models?

Friedman and others view changes in velocity as the result of changes in

A monetarists would expect an increase in government spending to have a strong effect on output only if the spending increase was

Targeting money growth will lead to stable output growth only if

Monetarists believe in all of the following except

Compare and contrast the monetarist and Keynesian views to the inherent stability/instability of the economy.How do these views inform their opinions about the use of discretionary policy?

According to the monetarist view,the

The difference between the monetarist and Keynesian views on discretionary monetary policy is that the monetarists

The Monetarist model differs from the classical model in that

Keynes and many of his contemporaries believed that money was

The monetarists would expect a tax cut to have a strong effect on output only if the spending increase was

During the Great Depression,the money supply fell by more than 25%.Explain this fact and the role it played in the Great Depression from the Monetarist and Keynesian perspectives.

A liquidity trap is

In the modern Keynesian model,velocity

The monetarist explanations of the Great Depression focus on

Early Keynesians concluded that the quantity of money was not important because they assumed

Milton Friedman and others view the instability of velocity in the 1980s as the result of a number of one-time events during that decade.What were these events?

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

Exam 9: The Monetarist Counterrevolution

If interest rates rise,then velocity should ____ in the Keynesian model and _____ in the Monetarist model.

Monetarists emphasize

If the Fed followed through on plans to be more open to and more quickly provide the public with information about monetary policy,then we would expect to see

If interest rates rise,what happens to the price of bonds on the secondary market? How does this fact affect the demand for money and velocity in the Monetarist and Keynesian models?

Friedman and others view changes in velocity as the result of changes in

A monetarists would expect an increase in government spending to have a strong effect on output only if the spending increase was

Targeting money growth will lead to stable output growth only if

Monetarists believe in all of the following except

Compare and contrast the monetarist and Keynesian views to the inherent stability/instability of the economy.How do these views inform their opinions about the use of discretionary policy?

According to the monetarist view,the

The difference between the monetarist and Keynesian views on discretionary monetary policy is that the monetarists

The Monetarist model differs from the classical model in that

Keynes and many of his contemporaries believed that money was

The monetarists would expect a tax cut to have a strong effect on output only if the spending increase was

During the Great Depression,the money supply fell by more than 25%.Explain this fact and the role it played in the Great Depression from the Monetarist and Keynesian perspectives.

A liquidity trap is

In the modern Keynesian model,velocity

The monetarist explanations of the Great Depression focus on

Early Keynesians concluded that the quantity of money was not important because they assumed

Milton Friedman and others view the instability of velocity in the 1980s as the result of a number of one-time events during that decade.What were these events?

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

If interest rates rise,then velocity should in the Keynesian model and _ in the Monetarist model.