Chapter Seventeen: Module Quiz -- Monetarism

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  1. Monetarism is

      another name for Keynesian economics.
      a school of thought that stresses the importance of maintaining the gold standard.
      a school of thought that stresses the important role of the money supply.
      now entirely defunct.
      none of the above.

  2. Velocity is best defined as

      the speed at which money can flow through the Federal Reserve counting machines.
      the rate at which consumers spend their disposable income.
      the average number of times that people withdraw money from their checking account each year.
      the average number of times that a dollar turns over on the purchase of final goods and services in a year.

  3. Which of the following is not a belief of monetarists?

      In the short-run, velocity is stable.
      In the long-run, inflation is always a monetary phenomenon.
      In the long-run, a ten percent increase in the money supply results in a ten percent increase in prices.
      In the short-run, Fiscal policy is a better instrument of stabilization policy than monetary policy.
      none of the above.

  4. If the money supply is $300 and velocity is 4, then nominal GDP is

      none of the above.

  5. Which statement regarding the rules vs. discretion debate is true?

      Keynesians believe the Federal Reserve should be bound by rules in conducting policy.
      Monetarists generally dislike fiscal policy, but they don't mind giving the Fed control of the money supply.
      Monetarists wish to bound the Fed to a money growth rule because they feel that the Fed could destabilize the economy if it has discretion over its actions.
      Keynesians like to give the President discretion over tax and spending decisions.

  6. Monetarism has fallen out of favor in many academic circles mainly because

      Milton Friedman, its founder, died.
      The velocity of money has been unstable over the past several years.
      The Federal Reserve has been able to reduce inflation without resorting to Monetarist advice.
      Keynesian economics accepted all the Monetarist criticisms, and now there is no difference between the two schools of thought.
      none of the above.

  7. If the economy's Aggregate Supply curve is perfectly vertical, then an increase in the money supply

      only leads to inflation.
      generates no additional employment.
      is ineffective at stimulating the economy's level of output.
      all of the above.

  8. If the money supply grows at 4 percent per year, a monetarist would predict that in the short run

      nominal GDP will grow at 4 percent per year.
      real GDP will grow at 4 percent per year.
      inflation will grow at 4 percent per year.
      none of the above.

  9. The assumption that is needed to transform the equation of exchange into the quantity theory of money is that velocity is stable in the short run.


  10. A Keynesian believes that the equation of exchange is valid.


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