Question 1

In the late 1990s and early 2000s,the Japanese economy has experienced

Accepted Answer

A) easy monetary policy as indicated by falling nominal interest rates. 
B) easy monetary policy as indicated by short-term interest rates near zero. 
C) tight monetary policy as indicated by falling asset prices. 
D) tight monetary policy as indicated by short-term interest rates near zero.

Question 2

If monetary policy can influence ________ prices and conditions in ________ markets,then it can affect spending through channels other than the traditional interest-rate channel.

Accepted Answer

A) asset; labor 
B) asset; credit 
C) commodity; labor 
D) commodity; credit

Question 3

Milton Friedman and Anna Schwartz showed that monetary policy during the Great Depression had

Accepted Answer

A) been quite inflationary. 
B) never been more contractionary. 
C) been more expansionary than in the 1920s. 
D) been essentially neutral.

Question 4

Explain the traditional interest-rate channel for expansionary monetary policy.Explain how a tight monetary policy affects the economy through this channel.

Accepted Answer

The answer of Explain the traditional interest-rate channel for expansionary...

Question 5

Economic theory suggests that ________ interest rates are ________ important than ________ interest rates in explaining investment behavior.

Accepted Answer

A) nominal; more; real 
B) real; less; nominal 
C) real; more; nominal 
D) market; more; real

Question 6

The monetarist reduced-form evidence does not specify the working of the economy and thus is considered to be a

Accepted Answer

A) scientific model. 
B) open model. 
C) black box. 
D) black hole.

Question 7

Tobin's q is defined as the market value of firms ________ the replacement cost of capital.

Accepted Answer

A) times 
B) minus 
C) plus 
D) divided by

Question 8

According to Tobin's q theory,when q is ________,firms will not purchase new investment goods because the market value of firms is ________ relative to the cost of capital.

Accepted Answer

A) low; low 
B) low; high 
C) high; low 
D) high; high

Question 9

One of the best examples of an episode in which a change in monetary policy appears to have been an exogenous event is the ________ in reserve requirements in ________.

Accepted Answer

A) increase; 1936-1937 
B) decrease; 1936-1937 
C) decrease; 1818-1819 
D) increase; 1818-1819

Question 10

The ________ held the view that monetary policy does not matter at all for movements in aggregate output.

Accepted Answer

A) new Keynesian economists 
B) early Keynesians 
C) early monetarists 
D) early classical economists

Question 11

Early Keynesians concluded that changes in monetary policy had no impact on aggregate output because early empirical studies found no linkage between movements in ________ and ________.

Accepted Answer

A) nominal interest rates; investment spending 
B) real interest rates; investment spending 
C) money supply; aggregate output 
D) investment spending; aggregate output

Question 12

During the Great Depression,Tobin's q

Accepted Answer

A) rose dramatically,as did real interest rates. 
B) fell to unprecedentedly low levels. 
C) stayed fairly constant,in contrast to most other economic measures. 
D) rose only slightly,in spite of Hoover's attempts to prop it up.

Question 13

The monetarist statistical evidence examines the correlations between both ________ and ________ with ________.

Accepted Answer

A) money; aggregate spending; the unemployment rate 
B) money; autonomous expenditures; the unemployment rate 
C) money; consumption spending; aggregate spending 
D) money; autonomous expenditures; aggregate spending

Question 14

Reverse causation between money and aggregate output is likely to be a problem when a central bank targets

Accepted Answer

A) a monetary aggregate. 
B) an interest rate. 
C) the exchange rate. 
D) the inflation rate.

Question 15

According to Tobin's q theory,if q is ________,new plant and equipment capital is ________ relative to the market value of business firms,so companies can buy a lot of new investment goods with only a ________ issue of stock.

Accepted Answer

A) high; dear; large 
B) high; cheap; large 
C) high; cheap; small 
D) low; cheap; large 
E) low; cheap; small

Question 16

According to the household liquidity effect,an expansionary monetary policy causes a ________ in the value of households' financial assets,causing consumer durable expenditure to ________.

Accepted Answer

A) decline; rise 
B) rise; rise 
C) rise; fall 
D) decline; fall

Question 17

The subprime financial crisis caused a recession because of the ________ in adverse selection and moral hazard problems and the ________ in housing prices.

Accepted Answer

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

Question 18

As a result of recent empirical research,there has been a convergence of Keynesian and monetarist opinion to the view that

Accepted Answer

A) money is all that matters. 
B) money does matter. 
C) money does not matter. 
D) fiscal policy is all that matters.

Question 19

In a period of deflation,when there is a declining price level,________ nominal interest rates do not necessarily indicate that the cost of borrowing is ________ or that monetary policy is easy.

Accepted Answer

A) low; low 
B) low; high 
C) high; low 
D) high; high

Question 20

In a study published in 1963,Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period,the growth rate of the ________ decreased before ________ decreased.

Accepted Answer

A) money supply; interest rates 
B) money supply; output 
C) budget deficit; interest rates 
D) budget deficit; output

Exam 23: Transmission Mechanisms of Monetary Policy: The Evidence

In the late 1990s and early 2000s,the Japanese economy has experienced

If monetary policy can influence prices and conditions in markets,then it can affect spending through channels other than the traditional interest-rate channel.

Milton Friedman and Anna Schwartz showed that monetary policy during the Great Depression had

Explain the traditional interest-rate channel for expansionary monetary policy.Explain how a tight monetary policy affects the economy through this channel.

Economic theory suggests that interest rates are important than interest rates in explaining investment behavior.

The monetarist reduced-form evidence does not specify the working of the economy and thus is considered to be a

Tobin's q is defined as the market value of firms ________ the replacement cost of capital.

According to Tobin's q theory,when q is ,firms will not purchase new investment goods because the market value of firms is relative to the cost of capital.

One of the best examples of an episode in which a change in monetary policy appears to have been an exogenous event is the in reserve requirements in .

The ________ held the view that monetary policy does not matter at all for movements in aggregate output.

Early Keynesians concluded that changes in monetary policy had no impact on aggregate output because early empirical studies found no linkage between movements in and .

During the Great Depression,Tobin's q

The monetarist statistical evidence examines the correlations between both and with .

Reverse causation between money and aggregate output is likely to be a problem when a central bank targets

According to Tobin's q theory,if q is ,new plant and equipment capital is relative to the market value of business firms,so companies can buy a lot of new investment goods with only a issue of stock.

According to the household liquidity effect,an expansionary monetary policy causes a in the value of households' financial assets,causing consumer durable expenditure to .

The subprime financial crisis caused a recession because of the in adverse selection and moral hazard problems and the in housing prices.

As a result of recent empirical research,there has been a convergence of Keynesian and monetarist opinion to the view that

In a period of deflation,when there is a declining price level, nominal interest rates do not necessarily indicate that the cost of borrowing is or that monetary policy is easy.

In a study published in 1963,Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period,the growth rate of the decreased before decreased.