Question 1

According to aggregate demand and supply analysis,inflation is caused by

Accepted Answer

A) supply shocks. 
B) expansionary fiscal policies. 
C) expansionary monetary policies. 
D) rising prices.

Question 2

The ________ lag is the time it takes for policymakers to be sure of what the data are signaling about the future course of the economy,while the ________ lag represents the time it takes to pass legislation to implement a particular (fiscal)policy.

Accepted Answer

A) data; recognition 
B) recognition; legislative 
C) data; legislative 
D) implementation; legislative

Question 3

The ________ lag is the time it takes for policymakers to obtain the data that tell them what is happening to the economy,while the ________ lag is the time it takes for policymakers to be sure of what the data are signaling about the future course of the economy.

Accepted Answer

A) data; recognition 
B) recognition; data 
C) data; implementation 
D) implementation; recognition

Question 4

The ________ lag is the time it takes for policymakers to be sure of what the information is signaling about the future course of the economy,while the ________ lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy.

Accepted Answer

A) recognition; implementation 
B) recognition; legislative 
C) data; legislative 
D) data; implementation

Question 5

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.

Question 6

This method of financing government spending is frequently called printing money because high-powered money (the monetary base)is created in the process.

Accepted Answer

A) Financing government spending with taxes. 
B) The finance of government spending through a Treasury sale of bonds that are then purchased by the Fed. 
C) Financing government spending by selling bonds to the public,which pays for the bonds with currency. 
D) Financing government spending by selling bonds to the public,which pays for the bonds with checks.

Question 7

Of the five time lags that prevent a discretionary policy from returning aggregate output to full employment instantaneously,two do not slow the effectiveness of monetary policy-the

Accepted Answer

A) implementation and effectiveness lags. 
B) legislative and effectiveness lags. 
C) legislative and implementation lags. 
D) recognition and effectiveness lags.

Question 8

If the Fed pursues a policy goal of

Accepted Answer

A) preventing high interest rates,and deficits cause interest rates to rise,then deficits will lead to money creation. 
B) preventing high inflation,and deficits cause inflation to rise,then deficits will lead to money creation. 
C) preventing high bond prices,and deficits cause bond prices to rise,then deficits will lead to money creation. 
D) preventing high stock prices,and deficits cause stock prices to rise,then deficits will lead to money creation.

Question 9

The financing of government spending by issuing debt

Accepted Answer

A) causes both reserves and the monetary base to rise. 
B) causes both reserves and the monetary base to decline. 
C) causes reserves to rise,but the monetary base to decline. 
D) has no net effect on the monetary base.

Question 10

Aggregate demand and supply analysis conclude that continuously growing ________ will cause the price level to rise continually,thus generating inflation.

Accepted Answer

A) money supply 
B) government spending 
C) interest rates 
D) consumer expenditure

Question 11

Only when budget deficits are financed by money creation does the increased government spending lead to ________ in the ________.

Accepted Answer

A) a decrease; monetary base 
B) an increase; monetary base 
C) a decrease; money multiplier 
D) an increase; money multiplier

Question 12

Kayla,an economist,is interested in knowing if government deficits have been a factor in explaining rapid money growth in her country in the past twenty years.What ratio should Kayla examine?

Accepted Answer

A) The ratio of money to the monetary base 
B) The ratio of currency to demand deposits 
C) The ratio of money to government debt 
D) The ratio of government debt to GDP

Question 13

Evidence strongly supports the view that countries with high inflation also have

Accepted Answer

A) the lowest nominal interest rates. 
B) the highest rates of money growth. 
C) the smallest budget deficits. 
D) the lowest interest rates.

Question 14

Financing government spending by selling bonds to the public,which pays for the bonds with currency,

Accepted Answer

A) leads to a permanent decline in the monetary base. 
B) leads to a permanent increase in the monetary base. 
C) leads to a temporary increase in the monetary base. 
D) has no net effect on the monetary base.

Question 15

If an economist were interested in testing whether government budget deficits had been the cause of excessive monetary growth for a country for the period 1950-2000,she would examine the behavior of

Accepted Answer

A) the ratio of government spending to GDP. 
B) the money supply-to-monetary-base ratio. 
C) interest rates. 
D) the government debt-to-GDP ratio.

Question 16

Economists usually view ________ policy as having a shorter implementation lag than ________ policy,but there is substantial uncertainty about how long this lag is.

Accepted Answer

A) fiscal; incomes 
B) fiscal; monetary 
C) monetary; incomes 
D) monetary; fiscal

Question 17

The ________ lag represents the time it takes to pass legislation to implement a particular (fiscal)policy,while the ________ lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy.

Accepted Answer

A) legislative; effectiveness 
B) legislative; recognition 
C) legislative; implementation 
D) implementation; legislative

Question 18

Which of the following would provide the strongest evidence that rapid money growth is the driving force behind inflation?

Accepted Answer

A) An endogenous increase in the money supply that preceded the onset of inflation. 
B) An exogenous increase in the money supply that preceded the onset of inflation. 
C) An endogenous increase in the money supply that lagged the onset of inflation. 
D) An exogenous increase in the money supply that lagged the onset of inflation.

Question 19

Advocates of nondiscretionary policy emphasize the importance of a constant money growth rate rule more than the balanced-budget amendment or restrictions on union power because

Accepted Answer

A) they regard excessive money growth as the cause of inflation. 
B) they believe that excessive government spending,not excessive monetary growth,is the cause of inflation. 
C) they believe that while unions cause inflation,they are too politically powerful to deal with. 
D) they regard high tax rates as the cause of inflation.

Question 20

The ________ lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy,while the ________ lag is the time it takes for the policy to actually have an impact on the economy.

Accepted Answer

A) recognition; implementation 
B) legislative; effectiveness 
C) implementation; recognition 
D) implementation; effectiveness

Exam 24: Money and Inflation

According to aggregate demand and supply analysis,inflation is caused by

The lag is the time it takes for policymakers to be sure of what the data are signaling about the future course of the economy,while the lag represents the time it takes to pass legislation to implement a particular (fiscal) policy.

The lag is the time it takes for policymakers to obtain the data that tell them what is happening to the economy,while the lag is the time it takes for policymakers to be sure of what the data are signaling about the future course of the economy.

The lag is the time it takes for policymakers to be sure of what the information is signaling about the future course of the economy,while the lag is the time it takes for policymakers to change policy instruments once they have decided on the new 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

This method of financing government spending is frequently called printing money because high-powered money (the monetary base) is created in the process.

Of the five time lags that prevent a discretionary policy from returning aggregate output to full employment instantaneously,two do not slow the effectiveness of monetary policy-the

If the Fed pursues a policy goal of

The financing of government spending by issuing debt

Aggregate demand and supply analysis conclude that continuously growing ________ will cause the price level to rise continually,thus generating inflation.

Only when budget deficits are financed by money creation does the increased government spending lead to in the .

Kayla,an economist,is interested in knowing if government deficits have been a factor in explaining rapid money growth in her country in the past twenty years.What ratio should Kayla examine?

Evidence strongly supports the view that countries with high inflation also have

Financing government spending by selling bonds to the public,which pays for the bonds with currency,

If an economist were interested in testing whether government budget deficits had been the cause of excessive monetary growth for a country for the period 1950-2000,she would examine the behavior of

Economists usually view policy as having a shorter implementation lag than policy,but there is substantial uncertainty about how long this lag is.

The lag represents the time it takes to pass legislation to implement a particular (fiscal) policy,while the lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy.

Which of the following would provide the strongest evidence that rapid money growth is the driving force behind inflation?

Advocates of nondiscretionary policy emphasize the importance of a constant money growth rate rule more than the balanced-budget amendment or restrictions on union power because

The lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy,while the lag is the time it takes for the policy to actually have an impact on the economy.

Exam 24: Money and Inflation

According to aggregate demand and supply analysis,inflation is caused by

The ________ lag is the time it takes for policymakers to be sure of what the data are signaling about the future course of the economy,while the ________ lag represents the time it takes to pass legislation to implement a particular (fiscal) policy.

The ________ lag is the time it takes for policymakers to obtain the data that tell them what is happening to the economy,while the ________ lag is the time it takes for policymakers to be sure of what the data are signaling about the future course of the economy.

The ________ lag is the time it takes for policymakers to be sure of what the information is signaling about the future course of the economy,while the ________ lag is the time it takes for policymakers to change policy instruments once they have decided on the new 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

This method of financing government spending is frequently called printing money because high-powered money (the monetary base) is created in the process.

Of the five time lags that prevent a discretionary policy from returning aggregate output to full employment instantaneously,two do not slow the effectiveness of monetary policy-the

If the Fed pursues a policy goal of

The financing of government spending by issuing debt

Aggregate demand and supply analysis conclude that continuously growing ________ will cause the price level to rise continually,thus generating inflation.

Only when budget deficits are financed by money creation does the increased government spending lead to ________ in the ________.

Kayla,an economist,is interested in knowing if government deficits have been a factor in explaining rapid money growth in her country in the past twenty years.What ratio should Kayla examine?

Evidence strongly supports the view that countries with high inflation also have

Financing government spending by selling bonds to the public,which pays for the bonds with currency,

If an economist were interested in testing whether government budget deficits had been the cause of excessive monetary growth for a country for the period 1950-2000,she would examine the behavior of

Economists usually view ________ policy as having a shorter implementation lag than ________ policy,but there is substantial uncertainty about how long this lag is.

The ________ lag represents the time it takes to pass legislation to implement a particular (fiscal) policy,while the ________ lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy.

Which of the following would provide the strongest evidence that rapid money growth is the driving force behind inflation?

Advocates of nondiscretionary policy emphasize the importance of a constant money growth rate rule more than the balanced-budget amendment or restrictions on union power because

The ________ lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy,while the ________ lag is the time it takes for the policy to actually have an impact on the economy.

The lag is the time it takes for policymakers to be sure of what the data are signaling about the future course of the economy,while the lag represents the time it takes to pass legislation to implement a particular (fiscal) policy.

The lag is the time it takes for policymakers to obtain the data that tell them what is happening to the economy,while the lag is the time it takes for policymakers to be sure of what the data are signaling about the future course of the economy.

The lag is the time it takes for policymakers to be sure of what the information is signaling about the future course of the economy,while the lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy.

Only when budget deficits are financed by money creation does the increased government spending lead to in the .

Economists usually view policy as having a shorter implementation lag than policy,but there is substantial uncertainty about how long this lag is.

The lag represents the time it takes to pass legislation to implement a particular (fiscal) policy,while the lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy.

The lag is the time it takes for policymakers to change policy instruments once they have decided on the new policy,while the lag is the time it takes for the policy to actually have an impact on the economy.