Question 1

Monetarist and Keynesian theories of money demand differs in that

Accepted Answer

A) Monetarists assumes that the demand for money is highly inelastic while Keynes assumes money demand is elastic. 
B) Monetarists assumes that the money demand function is highly stable while Keynes assumes it is unstable. 
C) Monetarists assumes that there is only a transactions demand for money while Keynes also considers the precautionary and speculative demands for money. 
D) Monetarists assume that the proportion of income held in theform of money is constant while Keynes believes it varies. 
E) all of the above. 
A) Monetarists assumes that the demand for money is highly inelastic while Keynes assumes money demand is elastic. 
B) Monetarists assumes that the money demand function is highly stable while Keynes assumes it is unstable. 
C) Monetarists assumes that there is only a transactions demand for money while Keynes also considers the precautionary and speculative demands for money. 
D) Monetarists assume that the proportion of income held in theform of money is constant while Keynes believes it varies. 
E) all of the above.

Question 2

Compare and contrast the long-run and short-run effects of a permanent increase in the rate of money growth in the Monetarist model.

Accepted Answer

In the short-run,this increase in the mo

Question 3

According to the Monetarists,the real effect of monetary policy on output is

Accepted Answer

A) long-lasting and unpredictable. 
B) predictable and beneficial. 
C) nonexistent in the short run. 
D) always less than fiscal policy 
A) long-lasting and unpredictable. 
B) predictable and beneficial. 
C) nonexistent in the short run. 
D) always less than fiscal policy

Question 4

Both the classical and monetarist models assume all of the following except

Accepted Answer

A) perfectly flexible prices. 
B) perfectly flexible wages. 
C) perfect information. 
D) vertical aggregate supply curve in the long-run. 
A) perfectly flexible prices. 
B) perfectly flexible wages. 
C) perfect information. 
D) vertical aggregate supply curve in the long-run.

Question 5

In the monetarist model,an increase in both government spending and taxes would

Accepted Answer

A) lead to a large increase in interest rates. 
B) increase income dollar for dollar with the increase in government spending. 
C) have a much smaller impact on income than in the Keynesian model. 
D) all of the above. 
A) lead to a large increase in interest rates. 
B) increase income dollar for dollar with the increase in government spending. 
C) have a much smaller impact on income than in the Keynesian model. 
D) all of the above.

Question 6

According to the monetarists,the rise in (M1)velocity in the mid-1990s can be attributed to

Accepted Answer

A) changes in the type of bank deposits that are available to the public. 
B) new legal ceilings imposed on the deposit rates financial institutions are permitted to pay depositors. 
C) the phasing out of legal ceilings on the deposit rates financial institutions are allowed to pay depositors. 
D) Both a and b 
E) Both a and c 
A) changes in the type of bank deposits that are available to the public. 
B) new legal ceilings imposed on the deposit rates financial institutions are permitted to pay depositors. 
C) the phasing out of legal ceilings on the deposit rates financial institutions are allowed to pay depositors. 
D) Both a and b 
E) Both a and c

Question 7

In the Keynesian model,and expected increase in the interest rate

Accepted Answer

A) increases the demand for bonds and the demand for money. 
B) increases the demand for bonds and the demand for stocks. 
C) decreases the demand for bonds and increases the demand for money. 
D) increases the demand for bonds and decreases the demand for money. 
A) increases the demand for bonds and the demand for money. 
B) increases the demand for bonds and the demand for stocks. 
C) decreases the demand for bonds and increases the demand for money. 
D) increases the demand for bonds and decreases the demand for money.

Question 8

According to the monetarists,the ratio of nominal GDP to the money stock should be

Accepted Answer

A) highly unstable in short run and in long run. 
B) unstable only during recession. 
C) unstable only in the long run. 
D) quite stable in the short run and the long run. 
E) unstable only if the LM curve shifts. 
A) highly unstable in short run and in long run. 
B) unstable only during recession. 
C) unstable only in the long run. 
D) quite stable in the short run and the long run. 
E) unstable only if the LM curve shifts.

Question 9

_____ believe that the primary causes of the Depression were autonomous declines in aggregate demand initiated by shocks to the IS curve

Accepted Answer

A) Monetarists. 
B) classical economists. 
C) early and late Keynesians. 
D) early Keynesians only. 
A) Monetarists. 
B) classical economists. 
C) early and late Keynesians. 
D) early Keynesians only.

Question 10

Since the 1980s,

Accepted Answer

A) monetarism reached its peak. 
B) the influence of the monetarists and Keynesians both eroded. 
C) monetarism re-established itself with a stable money/income relationship. 
D) monetarism declined in influence as Keyesian thought overtook it in influence. 
A) monetarism reached its peak. 
B) the influence of the monetarists and Keynesians both eroded. 
C) monetarism re-established itself with a stable money/income relationship. 
D) monetarism declined in influence as Keyesian thought overtook it in influence.

Question 11

The experience of the United States and other industrialized countries in the 1930s contradicts the classical view of the labor market where the money wage adjusts quickly to maintain full employment.On this issue

Accepted Answer

A) the Keynesians agree but the monetarists disagree. 
B) the monetarists agree but the Keynesians do not agree. 
C) both the Keynesians and monetarists are in agreement. 
D) neither the Keynesians nor the monetarists agree. 
A) the Keynesians agree but the monetarists disagree. 
B) the monetarists agree but the Keynesians do not agree. 
C) both the Keynesians and monetarists are in agreement. 
D) neither the Keynesians nor the monetarists agree.

Question 12

The Keynesians believe that

Accepted Answer

A) the Fed played a primary role in driving the Great Depression. 
B) the Fed played an important role in preventing the Great Depression from being worse than it could have been. 
C) the Fed played a negative but secondary role in the Great Depression. 
D) the Federal Reserve did all it could to prevent the Great Depression but essentially played no role in it. 
A) the Fed played a primary role in driving the Great Depression. 
B) the Fed played an important role in preventing the Great Depression from being worse than it could have been. 
C) the Fed played a negative but secondary role in the Great Depression. 
D) the Federal Reserve did all it could to prevent the Great Depression but essentially played no role in it.

Question 13

The classical and Monetarist models agree that

Accepted Answer

A) the use of fiscal policy can stabilize output. 
B) money demand is inherently unstable. 
C) the public has perfect information about the price level. 
D) increases in the money supply are the primary cause of inflation. 
E) none of the above 
A) the use of fiscal policy can stabilize output. 
B) money demand is inherently unstable. 
C) the public has perfect information about the price level. 
D) increases in the money supply are the primary cause of inflation. 
E) none of the above

Question 14

If the central bank targets a rate of nominal GDP growth,then it would have to _____ money growth when nominal GDP fell below its target in order to _____ inflation and ____ real GDP.

Accepted Answer

A) increase; increase; increase 
B) increase; decrease; decrease 
C) decrease; decrease; decrease 
D) decrease; decrease; increase 
A) increase; increase; increase 
B) increase; decrease; decrease 
C) decrease; decrease; decrease 
D) decrease; decrease; increase

Question 15

The third monetarist proposition asserts that in the short run,

Accepted Answer

A) changes in money demand are the dominant factor causing cyclical movements in output and employment. 
B) money supply is only one of many factors resulting in cyclical movements in output and employment. 
C) money primarily influences the price level and other nominal magnitudes. 
D) None of the above 
A) changes in money demand are the dominant factor causing cyclical movements in output and employment. 
B) money supply is only one of many factors resulting in cyclical movements in output and employment. 
C) money primarily influences the price level and other nominal magnitudes. 
D) None of the above

Question 16

What do Monetarists believe about the slope of the IS and LM curves and why? What do these beliefs imply about the effectiveness of monetary policy.

Accepted Answer

A strong quantity theorist would draw th

Question 17

According to monetarists,

Accepted Answer

A) businesses and households are the primary source of instability in the economy. 
B) the Federal Reserve causes instability in the economy primarily by allowing instability in the money demand that determines the level of economic activity. 
C) the government can stabilize the economy by interfering with the normal misadjustment mechanisms in the private sector. 
D) All of the above 
E) None of the above 
A) businesses and households are the primary source of instability in the economy. 
B) the Federal Reserve causes instability in the economy primarily by allowing instability in the money demand that determines the level of economic activity. 
C) the government can stabilize the economy by interfering with the normal misadjustment mechanisms in the private sector. 
D) All of the above 
E) None of the above

Question 18

Compare and contrast the Monetarist theory of money demand curve with the Keynesian theory of money demand.Specifically,make sure to talk about how each model views the behavior of velocity over the business cycle.

Accepted Answer

According to Friedman,the monetarists be

Question 19

In the Monetarist model,how long is the long-run? How does the transition between the long run and the short run take place?

Accepted Answer

In the short run,the actual price level

Question 20

Which of the following is not a possible source of instability in velocity in the Monetarist model?

Accepted Answer

A) financial innovation. 
B) changes in monetary policy 
C) changes in interest rates 
D) credit cards. 
A) financial innovation. 
B) changes in monetary policy 
C) changes in interest rates 
D) credit cards.

Monetarist and Keynesian theories of money demand differs in that

Compare and contrast the long-run and short-run effects of a permanent increase in the rate of money growth in the Monetarist model.

According to the Monetarists,the real effect of monetary policy on output is

Both the classical and monetarist models assume all of the following except

In the monetarist model,an increase in both government spending and taxes would

According to the monetarists,the rise in (M1)velocity in the mid-1990s can be attributed to

In the Keynesian model,and expected increase in the interest rate

According to the monetarists,the ratio of nominal GDP to the money stock should be

_____ believe that the primary causes of the Depression were autonomous declines in aggregate demand initiated by shocks to the IS curve

Since the 1980s,

The experience of the United States and other industrialized countries in the 1930s contradicts the classical view of the labor market where the money wage adjusts quickly to maintain full employment.On this issue

The Keynesians believe that

The classical and Monetarist models agree that

If the central bank targets a rate of nominal GDP growth,then it would have to ___ money growth when nominal GDP fell below its target in order to _ inflation and __ real GDP.

The third monetarist proposition asserts that in the short run,

What do Monetarists believe about the slope of the IS and LM curves and why? What do these beliefs imply about the effectiveness of monetary policy.

According to monetarists,

Compare and contrast the Monetarist theory of money demand curve with the Keynesian theory of money demand.Specifically,make sure to talk about how each model views the behavior of velocity over the business cycle.

In the Monetarist model,how long is the long-run? How does the transition between the long run and the short run take place?

Which of the following is not a possible source of instability in velocity in the Monetarist model?

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

Monetarist and Keynesian theories of money demand differs in that

Compare and contrast the long-run and short-run effects of a permanent increase in the rate of money growth in the Monetarist model.

According to the Monetarists,the real effect of monetary policy on output is

Both the classical and monetarist models assume all of the following except

In the monetarist model,an increase in both government spending and taxes would

According to the monetarists,the rise in (M1)velocity in the mid-1990s can be attributed to

In the Keynesian model,and expected increase in the interest rate

According to the monetarists,the ratio of nominal GDP to the money stock should be

_____ believe that the primary causes of the Depression were autonomous declines in aggregate demand initiated by shocks to the IS curve

Since the 1980s,

The experience of the United States and other industrialized countries in the 1930s contradicts the classical view of the labor market where the money wage adjusts quickly to maintain full employment.On this issue

The Keynesians believe that

The classical and Monetarist models agree that

If the central bank targets a rate of nominal GDP growth,then it would have to _____ money growth when nominal GDP fell below its target in order to _____ inflation and ____ real GDP.

The third monetarist proposition asserts that in the short run,

What do Monetarists believe about the slope of the IS and LM curves and why? What do these beliefs imply about the effectiveness of monetary policy.

According to monetarists,

Compare and contrast the Monetarist theory of money demand curve with the Keynesian theory of money demand.Specifically,make sure to talk about how each model views the behavior of velocity over the business cycle.

In the Monetarist model,how long is the long-run? How does the transition between the long run and the short run take place?

Which of the following is not a possible source of instability in velocity in the Monetarist model?

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 the central bank targets a rate of nominal GDP growth,then it would have to ___ money growth when nominal GDP fell below its target in order to _ inflation and __ real GDP.