Question Details

I really don't believe monetary policy is a very useful tool for fine-tuning the business cycle 


1. "The problem with monetarism is that its advocates have seen it as infallible over short periods of time and wish it to be rigid in its application over all periods of time." The advocates of monetarism wish it to be rigid in its application over all periods of time to 
a) weaken fiscal policy b) avoid monetary policy errors 
c) strengthen the impact of monetary policy 
d) ensure the independence of the central bank 
2. "I really don't believe monetary policy is a very useful tool for fine-tuning the business cycle or fighting unemployment directly. I do believe that what monetary policy can do is control the inflation rate." Those who don't believe that monetary policy is a very useful tool for fine-tuning the business cycle believe that 
a) monetary authorities never make mistakes 
b) monetary policy has long and variable lags 51 
c) the central bank has tight control over the money supply 
d) monetary authorities have accurate information about the state of the economy 
3. "But the experience of M1 still unnerves: innovations in the banking system, especially interest-bearing checking accounts which at that time were not counted in M1, allowed the public to shift money holdings into and out of different instruments in such as way as to make the relationship between M1 and total spending in the economy unstable." The unnerving experience with M1 was that M1 velocity was 
a) constant b) unstable c) increasing steadily d) decreasing steadily 
4. "A monetary rule need not mean a single, bald number. If the central bank fears velocity shifts, rules could be adopted for adjusting the target in the face of a trend change in velocity." If velocity were trending upward, the target money growth rate would be adjusted 
a) upward b) downward c) to be zero d) to match inflation 
5. "If the Fed's sole objective is going to be fighting inflation, it may as well be run by a computer, say critics of a proposal to change its mandate." According to the monetarists, to run the Fed's inflation-fighting policy the computer should be programmed to 
a) keep the money supply constant 
b) increase money supply growth in recessions and decrease it in booms 
c) increase money supply growth in booms and decrease it during recessions 
d) increase the money supply at the same rate during booms and recessions



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