Question 1

The economist who proposed that,"Inflation is always and everywhere a monetary phenomenon" was

Accepted Answer

A) John Maynard Keynes. 
B) John R.Hicks. 
C) Milton Friedman. 
D) Franco Modigliani. 
A) John Maynard Keynes. 
B) John R.Hicks. 
C) Milton Friedman. 
D) Franco Modigliani. C

Question 2

The nonactivists who opposed the recent fiscal stimulus package argue that

Accepted Answer

A) fiscal stimulus would take too long to work because of long implementation lags. 
B) fiscal stimulus might kick in after the economy had already recovered. 
C) fiscal stimulus could lead to increased volatility in inflation and economic activity. 
D) all of the above. 
E) none of the above. 
A) fiscal stimulus would take too long to work because of long implementation lags. 
B) fiscal stimulus might kick in after the economy had already recovered. 
C) fiscal stimulus could lead to increased volatility in inflation and economic activity. 
D) all of the above. 
E) none of the above. D

Question 3

To say that inflation is a monetary phenomenon seems to beg the question

Accepted Answer

A) Why does inflationary monetary policy occur? 
B) Why do politicians seek reelection? 
C) Why is the Fed independent? 
D) Why does the U.S.Treasury print so much money? 
A) Why does inflationary monetary policy occur? 
B) Why do politicians seek reelection? 
C) Why is the Fed independent? 
D) Why does the U.S.Treasury print so much money? A

Question 4

Nonactivists of policies contend that a policy of shifting the aggregate ________ curve will be costly because it produces ________ volatility in both the price level and output.

Accepted Answer

A) supply;less 
B) supply;more 
C) demand;less 
D) demand;more 
A) supply;less 
B) supply;more 
C) demand;less 
D) demand;more

Question 5

The disruption to financial markets starting in August 2007 that caused both consumer and business spending to fall

Accepted Answer

A) shifted the aggregate demand curve to the right. 
B) shifted the aggregate demand curve to the left. 
C) shifted the aggregate supply curve to the right. 
D) shifted the aggregate supply curve to the left. 
A) shifted the aggregate demand curve to the right. 
B) shifted the aggregate demand curve to the left. 
C) shifted the aggregate supply curve to the right. 
D) shifted the aggregate supply curve to the left.

Question 6

Activists of the policies believe that

Accepted Answer

A) the self-correcting mechanism through wage and price adjustment is very slow. 
B) wages and prices are sticky. 
C) the government needs to pursue active policy to eliminate high unemployment when it develops. 
D) all of the above. 
A) the self-correcting mechanism through wage and price adjustment is very slow. 
B) wages and prices are sticky. 
C) the government needs to pursue active policy to eliminate high unemployment when it develops. 
D) all of the above.

Question 7

Which of the following is most likely to lead to inflationary monetary policy?

Accepted Answer

A) declining oil prices 
B) resolution of conflict in the Middle East 
C) the enactment of a free-trade agreement with Mexico 
D) rising government budget deficits 
A) declining oil prices 
B) resolution of conflict in the Middle East 
C) the enactment of a free-trade agreement with Mexico 
D) rising government budget deficits

Question 8

If policymakers set a target for unemployment that is too low because it is less than the natural rate of unemployment,this can set the stage for a higher rate of money growth and

Accepted Answer

A) cost-push inflation. 
B) demand-pull inflation. 
C) cost-pull inflation. 
D) demand-push inflation. 
A) cost-push inflation. 
B) demand-pull inflation. 
C) cost-pull inflation. 
D) demand-push inflation.

Question 9

Complete Milton Friedman's famous proposition: "Inflation is always and everywhere a ________ phenomenon."

Accepted Answer

A) monetary 
B) political 
C) policy 
D) budgetary 
A) monetary 
B) political 
C) policy 
D) budgetary

Question 10

The time it takes for the policy actually to have an impact on the economy is called

Accepted Answer

A) the data lag. 
B) the recognition lag. 
C) the legislative lag. 
D) the implementation lag. 
E) the effectiveness lag. 
A) the data lag. 
B) the recognition lag. 
C) the legislative lag. 
D) the implementation lag. 
E) the effectiveness lag.

Question 11

If aggregate output is below the natural rate level,nonactivists of policies would recommend that the government

Accepted Answer

A) do nothing. 
B) try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right. 
C) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the right. 
D) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the left. 
A) do nothing. 
B) try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right. 
C) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the right. 
D) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the left.

Question 12

The implementation lag is

Accepted Answer

A) the time it takes for policy makers to obtain data indicating what is happening in the economy. 
B) the time it takes for policy makers to be sure of what the data are signaling about the future course of the economy. 
C) the time it takes to pass legislation to implement a particular policy. 
D) the time it takes for policy makers to change policy instruments once they have decided on the new policy. 
E) the time it takes for the policy actually to have an impact on the economy. 
A) the time it takes for policy makers to obtain data indicating what is happening in the economy. 
B) the time it takes for policy makers to be sure of what the data are signaling about the future course of the economy. 
C) the time it takes to pass legislation to implement a particular policy. 
D) the time it takes for policy makers to change policy instruments once they have decided on the new policy. 
E) the time it takes for the policy actually to have an impact on the economy.

Question 13

When the policy rate hits its lower bound and inflation keeps falling,this portion of the aggregate demand curve is

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) flat. 
D) undetermined. 
A) downward sloping. 
B) upward sloping. 
C) flat. 
D) undetermined.

Question 14

Because policies in the United States were too expansionary from 1965 through 1973,the U.S.suffered

Accepted Answer

A) demand-pull inflation. 
B) cost-push inflation,as workers sought higher wages in order to keep up with inflation. 
C) both demand-pull and cost-push inflation. 
D) neither demand-pull nor cost-push inflation. 
A) demand-pull inflation. 
B) cost-push inflation,as workers sought higher wages in order to keep up with inflation. 
C) both demand-pull and cost-push inflation. 
D) neither demand-pull nor cost-push inflation.

Question 15

When output is below potential and the policy rate has hit the floor of zero,the resulting fall in inflation leads to ________ real interest rates,which ________ output further,which causes inflation to fall further.

Accepted Answer

A) lower;increase 
B) higher;depress 
C) higher;increase 
D) lower;depress 
A) lower;increase 
B) higher;depress 
C) higher;increase 
D) lower;depress

Question 16

In the period 1965 through the 1970s,policymakers pursued ________ policies in order to achieve ________.

Accepted Answer

A) expansionary;high employment 
B) expansionary;low inflation 
C) contractionary;high employment 
D) contractionary;low inflation 
A) expansionary;high employment 
B) expansionary;low inflation 
C) contractionary;high employment 
D) contractionary;low inflation

Question 17

When the economy is hit by a negative demand shock and the central bank does not respond by changing the autonomous component of monetary policy,then

Accepted Answer

A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will not change. 
E) both A and B. 
A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will not change. 
E) both A and B.

Question 18

When the policy rate hits its lower bound and inflation keeps falling,this portion of the Monetary Policy curve is

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) flat. 
D) undetermined. 
A) downward sloping. 
B) upward sloping. 
C) flat. 
D) undetermined.

Question 19

When the economy suffers a temporary negative supply shock and the central bank responds by changing the autonomous component of monetary policy to keep inflation at the target inflation rate,then

Accepted Answer

A) aggregate output drops in the short run. 
B) output will return to potential output over time. 
C) aggregate output is stabilized. 
D) all of the above. 
E) both A and B. 
A) aggregate output drops in the short run. 
B) output will return to potential output over time. 
C) aggregate output is stabilized. 
D) all of the above. 
E) both A and B.

Question 20

When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then

Accepted Answer

A) inflation will be higher. 
B) output will be at its potential. 
C) output will be unchanged. 
D) inflation will be unchanged. 
E) both A and B. 
A) inflation will be higher. 
B) output will be at its potential. 
C) output will be unchanged. 
D) inflation will be unchanged. 
E) both A and B.

Exam 23: Monetary Policy Theory

The economist who proposed that,"Inflation is always and everywhere a monetary phenomenon" was

The nonactivists who opposed the recent fiscal stimulus package argue that

To say that inflation is a monetary phenomenon seems to beg the question

Nonactivists of policies contend that a policy of shifting the aggregate ________ curve will be costly because it produces ________ volatility in both the price level and output.

The disruption to financial markets starting in August 2007 that caused both consumer and business spending to fall

Activists of the policies believe that

Which of the following is most likely to lead to inflationary monetary policy?

If policymakers set a target for unemployment that is too low because it is less than the natural rate of unemployment,this can set the stage for a higher rate of money growth and

Complete Milton Friedman's famous proposition: "Inflation is always and everywhere a ________ phenomenon."

The time it takes for the policy actually to have an impact on the economy is called

If aggregate output is below the natural rate level,nonactivists of policies would recommend that the government

The implementation lag is

When the policy rate hits its lower bound and inflation keeps falling,this portion of the aggregate demand curve is

Because policies in the United States were too expansionary from 1965 through 1973,the U.S.suffered

When output is below potential and the policy rate has hit the floor of zero,the resulting fall in inflation leads to ________ real interest rates,which ________ output further,which causes inflation to fall further.

In the period 1965 through the 1970s,policymakers pursued ________ policies in order to achieve ________.

When the economy is hit by a negative demand shock and the central bank does not respond by changing the autonomous component of monetary policy,then

When the policy rate hits its lower bound and inflation keeps falling,this portion of the Monetary Policy curve is

When the economy suffers a temporary negative supply shock and the central bank responds by changing the autonomous component of monetary policy to keep inflation at the target inflation rate,then

When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

Filters

Nonactivists of policies contend that a policy of shifting the aggregate curve will be costly because it produces volatility in both the price level and output.

When output is below potential and the policy rate has hit the floor of zero,the resulting fall in inflation leads to real interest rates,which output further,which causes inflation to fall further.

In the period 1965 through the 1970s,policymakers pursued policies in order to achieve .