Question 1

The Monetarist model differs from the classical model in that

Accepted Answer

A)  changes in aggregate demand,not aggregate supply,drive changes in output.
B)  changes in the money supply drive changes in inflation inflation.
C)  changes in aggregate supply,not aggregate demand,drive changes in ouput.
D)  money demand is not always stable.
E)  none of the above.F) C) and E)
G) A) and B)

Question 2

The monetarist explanations of the Great Depression focus on

Accepted Answer

A)  falls in the LM curve and aggregate demand.
B)  falls in aggregate supply.
C)  fall in the IS curve and aggregate demand..
D)  falls in expectations and the expected price level.E) None of the above
F) A) and B)

Question 3

According to the monetarist view,the

Accepted Answer

A)  IS schedule is quite flat; hence,reflecting a high interest elasticity of aggregate demand.
B)  IS schedule is quite steep; hence,reflecting a high interest elasticity of aggregate demand.
C)  LM schedule is quite flat; hence,reflecting a high interest elasticity of money demand.
D)  IS schedule is almost vertical; hence,reflecting a very low interest elasticity of money demand.E) B) and D)
F) All of the above

Question 4

Friedman and others view changes in velocity as the result of changes in

Accepted Answer

A)  income.
B)  who is the chairman of the Federal Reserve.
C)  interest rates.
D)  inflation.E) A) and B)
F) A) and C)

Question 5

A monetarists would expect an increase in government spending to have a strong effect on output only if the spending increase was

Accepted Answer

A)  financed by an increase in the money supply.
B)  financed by a sale of bonds.
C)  financed by an increase in taxes.
D)  accompanied by a higher in the deficit.E) A) and D)
F) None of the above

Question 6

Targeting money growth will lead to stable output growth only if

Accepted Answer

A)  money demand and velocity change proportionally with output.
B)  fiscal policy remains unchanged.
C)  money demand and velocity are stable.
D)  the IS curve is steep.E) A) and B)
F) A) and C)

Question 7

The monetarists would expect a tax cut to have a strong effect on output only if the spending increase was

Accepted Answer

A)  financed by a sale of bonds.
B)  financed by a cut in government spending.
C)  financed by an increase in the money stock.
D)  accompanied by a reduction in the deficit.E) A) and B)
F) None of the above

Question 8

Monetarists emphasize

Accepted Answer

A)  crowding-out but not the liquidity trap.
B)  crowding-out and the liquidity trap.
C)  the liquidity trap but not crowding-out.
D)  neither crowding-out nor the liquidity trap.E) All of the above
F) B) and C) A

Question 9

Milton Friedman and others view the instability of velocity in the 1980s as the result of a number of one-time events during that decade.What were these events?

Accepted Answer

One of these events was the disinflation...

Question 10

Early Keynesians concluded that the quantity of money was not important because they assumed

Accepted Answer

A)  low interest elasticity of money demand and high interest elasticity of the demand for output.
B)  high interest elasticity of money demand and low interest elasticity of the demand for output.
C)  high interest elasticity of money demand and high interest elasticity of the demand for output.
D)  both low interest elasticity of money demand and of the demand for output.E) All of the above
F) None of the above

Question 11

During the Great Depression,the money supply fell by more than 25%.Explain this fact and the role it played in the Great Depression from the Monetarist and Keynesian perspectives.

Accepted Answer

Monetarists believe that this fall in th...

Question 12

If the Fed followed through on plans to be more open to and more quickly provide the public with information about monetary policy,then we would expect to see

Accepted Answer

A)  the impact of the money supply on output would get stronger.
B)  the Fed would not have any power over output in the future.
C)  the impact of the money supply on output would get weaker.
D)  information does not affect output.E) B) and D)
F) A) and B) C

Question 13

Compare and contrast the monetarist and Keynesian views to the inherent stability/instability of the economy.How do these views inform their opinions about the use of discretionary policy?

Accepted Answer

Monetarist see the economy as inherently...

Question 14

Monetarists believe in all of the following except

Accepted Answer

A)  steady growth in inflation will yield stable output.
B)  steady growth in the money supply will yield stable output.
C)  fluctuations in the money supply are responsible for business cycles.
D)  the Fed should not be involved in trying to stabilize the economy.E) A) and C)
F) B) and D)

Question 15

A liquidity trap is

Accepted Answer

A)  the vertical portion of the LM schedule.
B)  the horizontal portion of the LM schedule.
C)  a situation where a given change in the money stock induces a large reduction in the interest rate.
D)  Both a and c
E)  Both b and cF) A) and D)
G) B) and D)

Question 16

If interest rates rise,what happens to the price of bonds on the secondary market? How does this fact affect the demand for money and velocity in the Monetarist and Keynesian models?

Accepted Answer

When interest rates rise,the value of pr...

Question 17

In the modern Keynesian model,velocity

Accepted Answer

A)  varies positively with the level of the interest rate but not with income.
B)  varies positively with the level of the interest rate and with income.
C)  is constant.
D)  varies in the short run but is constant in the long run.
E)  none of the aboveF) A) and B)
G) A) and C)

Question 18

If interest rates rise,then velocity should ____ in the Keynesian model and _____ in the Monetarist model.

Accepted Answer

A)  rise; fall.
B)  stay the same,stay the same.
C)  rise,stay the same.
D)  fall; rise.
E)  none of the aboveF) C) and D)
G) A) and B) C

Question 19

Keynes and many of his contemporaries believed that money was

Accepted Answer

A)  major importance because the idea of the liquidity trap only came later.
B)  even more important than fiscal policy.
C)  little importance and monetary policy of little use as a stabilization tool.
D)  major importance but of little use as a stabilization tool.
E)  none of the above.F) None of the above
G) B) and E)

Question 20

The difference between the monetarist and Keynesian views on discretionary monetary policy is that the monetarists

Accepted Answer

A)  believe monetary policy is a stabilizing force and Keynesians believe it is primarily destabilizing.
B)  Keynesians think that monetary policy is always used effectively.
C)  believe monetary policy is a destabilizing force and Keynesians believe it is potentially stabilizing.
D)  favor "fine tuning" the economy by use of monetary policy while the Keynesians do not.E) C) and D)
F) A) and B)

Exam 9: The Monetarist Counterrevolution

The Monetarist model differs from the classical model in that

Correct AnswerverifiedShow Answer

The monetarist explanations of the Great Depression focus on

Correct AnswerverifiedShow Answer

According to the monetarist view,the

Correct AnswerverifiedShow Answer

Friedman and others view changes in velocity as the result of changes in

Correct AnswerverifiedShow Answer

A monetarists would expect an increase in government spending to have a strong effect on output only if the spending increase was

Correct AnswerverifiedShow Answer

Targeting money growth will lead to stable output growth only if

Correct AnswerverifiedShow Answer

The monetarists would expect a tax cut to have a strong effect on output only if the spending increase was

Correct AnswerverifiedShow Answer

Monetarists emphasize

Correct AnswerverifiedA

Milton Friedman and others view the instability of velocity in the 1980s as the result of a number of one-time events during that decade.What were these events?

Correct AnswerverifiedOne of these events was the disinflation...View AnswerShow Answer

Early Keynesians concluded that the quantity of money was not important because they assumed

Correct AnswerverifiedShow Answer

During the Great Depression,the money supply fell by more than 25%.Explain this fact and the role it played in the Great Depression from the Monetarist and Keynesian perspectives.

Correct AnswerverifiedMonetarists believe that this fall in th...View AnswerShow Answer

If the Fed followed through on plans to be more open to and more quickly provide the public with information about monetary policy,then we would expect to see

Correct AnswerverifiedC

Compare and contrast the monetarist and Keynesian views to the inherent stability/instability of the economy.How do these views inform their opinions about the use of discretionary policy?

Correct AnswerverifiedMonetarist see the economy as inherently...View AnswerShow Answer

Monetarists believe in all of the following except

Correct AnswerverifiedShow Answer

A liquidity trap is

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If interest rates rise,what happens to the price of bonds on the secondary market? How does this fact affect the demand for money and velocity in the Monetarist and Keynesian models?

Correct AnswerverifiedWhen interest rates rise,the value of pr...View AnswerShow Answer

In the modern Keynesian model,velocity

Correct AnswerverifiedShow Answer

If interest rates rise,then velocity should ____ in the Keynesian model and _____ in the Monetarist model.

Correct AnswerverifiedC

Keynes and many of his contemporaries believed that money was

Correct AnswerverifiedShow Answer

The difference between the monetarist and Keynesian views on discretionary monetary policy is that the monetarists

Correct AnswerverifiedShow Answer

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A

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One of these events was the disinflation...
View Answer

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Monetarists believe that this fall in th...
View Answer

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C

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Monetarist see the economy as inherently...
View Answer

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When interest rates rise,the value of pr...
View Answer

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If interest rates rise,then velocity should in the Keynesian model and _ in the Monetarist model.

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C

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