Recent Question

Economic policy these days is very risky because of a basic contradiction 1. “The argument is simple and convincing: Driven by an inexorable urge to cut costs and boost profits, business buys the latest labor-saving technology and fires workers, leading to higher unemployment across the economy. The government needs to do something about this greedy behavior.” Evaluate this argument. a) good argument because unemployment is ...

Other / Other 07 May 2016

What monetary policy is required to accomplish this 1. If the money supply is growing at 8 percent, the real rate of growth of GDP is 2 percent, and financial innovations are reducing the demand for money by 0.5 percent per year, long-run inflation is a) 6% or less b) more than 6% but not more than 7% c) more than 7% but not more than 8% d) more than 8% 2. Suppose "the" multiplier is 3.5, the money multiplier is 4.5, the income mult ...

Other / Other 07 May 2016

A growing number of economists view the Fed's new willingness 1. "A growing number of economists view the Fed's new willingness to take on more of the nation's debt as inflationary in the long run." This inflation worry is because a) the government may tax less b) the debt may become excessive c) the government may spend more d) the money supply may increase excessively 2. "With financial deregulation changing the meaning of money, ...

Other / Other 07 May 2016

The money multiplier tells us the ultimate increase in 1. The quantity of money demanded varies a) directly with both prices and output b) inversely with both prices and output c) directly with prices and inversely with output d) inversely with prices and directly with output 2. If the central bank prints more $10 bills and spends them, then as a direct result of this action 48 a) M1 and M2 both increase b) neither M1 nor M2 incre ...

Other / Other 07 May 2016

U.S. Federal Reserve Board chairman Paul Volcker told senators Thursday the huge federal budget 1. "Another criticism of deficit budgets is that they hamper the private sector's ability to raise capital." This hampering is caused by a) high taxes b) high bond prices c) high interest rates d) central bank bond purchases 2. "Ordinarily, an increase in the budget deficit raises interest rates, but this does not always happen." This may n ...

Other / Other 07 May 2016

How can the economy show just as much inflation with money growing only half as fast 1. "Far better for central bankers to get out of the fine tuning business. Instead they should try to keep ....." Complete this clipping. a) taxes low b) budgets balanced. c) money growth low d) government spending in check 2. "The Fed based its monetary policy in the 1980s on the assumption that velocity would continue its upward trend. Had they as ...

Other / Other 07 May 2016

The percentage change in nominal income is 1. If in 1986 nominal GDP was about $500 billion., then the stock of money (M1) was a) much more than this b) much less than this c) about the same as this d) unrelated to this figure Suppose the aggregate supply curve is vertical, velocity is 4, and the money supply increases by 10%. According to the quantity theory of money, 2. The percentage change in real income is a) 0% b) 10% c) 40% ...

Other / Other 07 May 2016

The board pumps money out of the economy by "In the process, the money multiplies, since the banks are allowed to lend more money than they actually have, within limits set by the Federal Reserve Board. The board tries to anticipate how much the money will multiply as this process unfolds. If its calculations are right, just enough money will be created to accommodate the growth it desires for the economy. If the calculations are wrong, i ...

Other / Other 07 May 2016

The rate of growth of the money supply is Suppose income is $800 billion, the price index is 120 (base year 1992), inflation is 10 percent, the long-run real rate of growth is 2 percent, and the current money supply is $200 billion. 1. Real (1992 dollars) income is a) $700b or less b) more than $700b but not more than $800b c) more than $800b but not more than $900b d) more than $900b 2. Velocity is a) 3 or less b) more than 3 b ...

Other / Other 07 May 2016

What change in the equilibrium level of income would result if government 1. Suppose the income multiplier with respect to government spending is 3.5, the money multiplier is 4.5 and the income multiplier with respect to the money supply is 2.5. What change in the equilibrium level of income would result if government spending were reduced by $1000 and at the same time the central bank purchased bonds worth $2000? a) less than or equal ...

Other / Other 07 May 2016