Question 1

According to the early Keynesians,

Accepted Answer

A) the money demand function was unstable; the interest elasticity of money demand was extremely high; and,as a consequence,changes in the quantity of money did not have important predictable effects on the level of economic activity. 
B) the money demand function was stable; the interest elasticity of money demand was low; and,as a consequence,changes in the quantity of money did not have important predictable effects on the level of economic activity. 
C) the money demand function was unstable; the interest elasticity of money demand was low; and,therefore,changes in the quantity of money did not have important effects on the level of economic activity. 
D) the money demand function was stable; the interest elasticity of money demand was high; and,therefore,changes in the quantity of money did have important effects on the level of economic activity. 
A) the money demand function was unstable; the interest elasticity of money demand was extremely high; and,as a consequence,changes in the quantity of money did not have important predictable effects on the level of economic activity. 
B) the money demand function was stable; the interest elasticity of money demand was low; and,as a consequence,changes in the quantity of money did not have important predictable effects on the level of economic activity. 
C) the money demand function was unstable; the interest elasticity of money demand was low; and,therefore,changes in the quantity of money did not have important effects on the level of economic activity. 
D) the money demand function was stable; the interest elasticity of money demand was high; and,therefore,changes in the quantity of money did have important effects on the level of economic activity.

Question 2

If the central bank targets interest rates,then the LM curve is

Accepted Answer

A) vertical. 
B) horizontal. 
C) upward sloping. 
D) downward sloping. 
A) vertical. 
B) horizontal. 
C) upward sloping. 
D) downward sloping.

Question 3

What do Keynesians believe caused the Great Depression?

Accepted Answer

The spending hypothesis is the Keynesian

Question 4

The monetarists believe that the LM schedule

Accepted Answer

A) and the IS schedule are both steep. 
B) is flat while the IS schedule is steep. 
C) and the IS schedule are both quite flat. 
D) is steep and the IS schedule is relatively flat. 
A) and the IS schedule are both steep. 
B) is flat while the IS schedule is steep. 
C) and the IS schedule are both quite flat. 
D) is steep and the IS schedule is relatively flat.

Question 5

Monetarists assume that people form their expectations only by

Accepted Answer

A) looking forwards 
B) looking backwards. 
C) using all available information. 
D) using publicly available forecasts. 
A) looking forwards 
B) looking backwards. 
C) using all available information. 
D) using publicly available forecasts.

Question 6

Which of the following is correct? Whenever the monetary authority pegs the interest rate,

Accepted Answer

A) it must be ready to adjust the interest rate on demand. 
B) the monetary authority must exchange money for bonds on demand. 
C) it has control of the quantity of money. 
D) None of the above 
A) it must be ready to adjust the interest rate on demand. 
B) the monetary authority must exchange money for bonds on demand. 
C) it has control of the quantity of money. 
D) None of the above

Question 7

What do Keynesians believe about the slope of the money demand curve and why? What do these beliefs imply about the effectiveness of monetary policy.

Accepted Answer

The Keynesians believe that the LM curve

Question 8

Keynesians believe that the interest elasticity of money demand

Accepted Answer

A) is lower than that believed by monetarists. 
B) is higher than suggested by monetarists. 
C) is completely elastic. 
D) is completely inelastic. 
E) none of the above. 
A) is lower than that believed by monetarists. 
B) is higher than suggested by monetarists. 
C) is completely elastic. 
D) is completely inelastic. 
E) none of the above.

Question 9

Keynesians view changes in velocity as the result of changes in

Accepted Answer

A) income. 
B) expectations. 
C) interest rates. 
D) inflation. 
E) all of the above. 
A) income. 
B) expectations. 
C) interest rates. 
D) inflation. 
E) all of the above.

Question 10

Monetarists argue that the interest elasticity of the demand for money is

Accepted Answer

A) low,while Keynesians say it is high. 
B) important in terms of affecting economic activity. 
C) highly variable. 
D) an important factor in determining if velocity is stable or unstable. 
A) low,while Keynesians say it is high. 
B) important in terms of affecting economic activity. 
C) highly variable. 
D) an important factor in determining if velocity is stable or unstable.

Question 11

How can the Cambridge equation be restated according to Friedman's money demand theory?

Accepted Answer

A) Md = k(rB,rE,r
D) Py 
B) Md = k/Py(rB,rE,r
D)  
C) Md = Py/k(rB,rE,r
D)  
D) Md = (rB,rE,r
D) Py/k 
A) Md = k(rB,rE,r
D) Py 
B) Md = k/Py(rB,rE,r
D)  
C) Md = Py/k(rB,rE,r
D)  
D) Md = (rB,rE,r
D) Py/k

Question 12

Keynesians argue that the interest elasticity of the demand for money is

Accepted Answer

A) low,while monetarists say it is high. 
B) unimportant in terms of affecting economic activity,while monetarists disagree. 
C) relatively high,while monetarists argue it is low. 
D) not a factor in determining if velocity is stable or unstable. 
A) low,while monetarists say it is high. 
B) unimportant in terms of affecting economic activity,while monetarists disagree. 
C) relatively high,while monetarists argue it is low. 
D) not a factor in determining if velocity is stable or unstable.

Question 13

In the Monetarist model,the long-run holds when

Accepted Answer

A) the money supply is constant. 
B) real wages are constant. 
C) output is constant. 
D) the expected price level equals the actual price level. 
E) none of the above. 
A) the money supply is constant. 
B) real wages are constant. 
C) output is constant. 
D) the expected price level equals the actual price level. 
E) none of the above.

Question 14

According to the second monetarist proposition,which of the following factors do not determine the level of real output in the long run?

Accepted Answer

A) The stock of capital goods 
B) The size of the labor force 
C) The quality of the labor force 
D) The state of technology 
E) The quantity of money 
A) The stock of capital goods 
B) The size of the labor force 
C) The quality of the labor force 
D) The state of technology 
E) The quantity of money

According to the early Keynesians,

If the central bank targets interest rates,then the LM curve is

What do Keynesians believe caused the Great Depression?

The monetarists believe that the LM schedule

Monetarists assume that people form their expectations only by

Which of the following is correct? Whenever the monetary authority pegs the interest rate,

What do Keynesians believe about the slope of the money demand curve and why? What do these beliefs imply about the effectiveness of monetary policy.

Keynesians believe that the interest elasticity of money demand

Keynesians view changes in velocity as the result of changes in

Monetarists argue that the interest elasticity of the demand for money is

How can the Cambridge equation be restated according to Friedman's money demand theory?

Keynesians argue that the interest elasticity of the demand for money is

In the Monetarist model,the long-run holds when

According to the second monetarist proposition,which of the following factors do not determine the level of real output in the long run?

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

According to the early Keynesians,

If the central bank targets interest rates,then the LM curve is

What do Keynesians believe caused the Great Depression?

The monetarists believe that the LM schedule

Monetarists assume that people form their expectations only by

Which of the following is correct? Whenever the monetary authority pegs the interest rate,

What do Keynesians believe about the slope of the money demand curve and why? What do these beliefs imply about the effectiveness of monetary policy.

Keynesians believe that the interest elasticity of money demand

Keynesians view changes in velocity as the result of changes in

Monetarists argue that the interest elasticity of the demand for money is

How can the Cambridge equation be restated according to Friedman's money demand theory?

Keynesians argue that the interest elasticity of the demand for money is

In the Monetarist model,the long-run holds when

According to the second monetarist proposition,which of the following factors do not determine the level of real output in the long run?

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