Question Details

The essence of the monetarist policy rule is to 56 



1. Believers in the monetarist rule assert that 
a) lags are long and variable b) the economy can be stabilized by automatic mechanisms 
c) the central bank should keep the money supply growth constant d) all of the above 
2. Suppose you are a monetarist and believe in the monetarist rule, which the monetary authorities appear to be following. If the economy begins to experience a slight increase in its inflation rate you would recommend that the monetary authorities 
a) increase the money growth rate slightly b) decrease the money growth rate slightly 
c) leave the money supply growth unchanged 
d) enact a one-time slight decrease in the money supply 
3. The essence of the monetarist policy rule is to 56 
a) fix the rate of growth of the money supply 
b) use monetary policy to fix the interest rate 
c) keep money supply growth equal to money demand growth 
d) use a robot to automatically raise money growth in recessions and lower it in booms. 
4. During an inflation velocity is 
a) higher because people hold fewer real money balances 
b) lower because people hold fewer real money balances 
c) higher because people hold more real money balances 
d) lower because people hold more real money balances 
5. Suppose velocity is constant and the real income elasticity of the demand for money (the percent rise in the demand for money due to a one percent rise in real income) is less than one. Then estimating inflation as money growth rate minus real growth rate 
a) overestimates inflation b) underestimates inflation 
c) is an erratic estimate of inflation d) remains an accurate estimate of inflation



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