moneyandbanktestbankchap24.docx

1、The Economics of Money, Banking, and Financial Markets, 9e (Mishkin) Chapter 24 Money and Inflation24.1 Money and Inflation: Evidence1) The condition of a continually rising price level is defined asA) stagflation.B) stagnation.C) disinflation.D) inflation.Answer: DQues Status: Previous Edition2) Th

2、e economist who proposed that, Inflation is always and everywhere a monetary phenomenon wasA) John Maynard Keynes.B) John R. Hicks.C) Milton Friedman.D) Franco Modigliani.Answer: CQues Status: Previous Edition3) Complete Milton Friedmans famous proposition: Inflation is always and everywhere a pheno

3、menon.A) monetaryB) politicalC) policyD) budgetary Answer: AQues Status: Previous Edition4) At first cut, the simple solution to fighting inflation isA) reducing the growth rate of the money supply.B) limiting the number of terms that politicians can serve in elective office.C) returning the economy

4、 to barter by prohibiting the use of fiat money.D) to impose price controls on businesses that attempt to raise prices. Answer: AQues Status: Previous Edition5) How do we prevent the inflationary fire from igniting again and stop the roller coaster ride in the inflation rate of the last 40 years? Mi

5、lton Friedmans famous proposition suggests the simple solution:A) reduce the number of terms that politicians are allowed to serve.B) reduce the growth rate of the money supply.C) reduce the marginal tax rate on low-income wage earners.D) increase the marginal tax rates on businesses that hike price

6、s in excess of 5 percent per year. Answer: BQues Status: Previous Edition166) Milton Friedmans proposition concerning the cause of inflation implies a simple solution to the inflation problem:A) reduce government budget deficits.B) limit the ability of fiscal policymakers to bring pressure to bear o

7、n the monetary authority.C) limit the number of terms that politicians are allowed to serve.D) reduce the growth rate of the money supply. Answer: DQues Status: Previous Edition7) Milton Friedmans proposition that inflation is always and everywhere a monetary phenomenon holds only ifA) government bu

8、dget deficits do not rise continually.B) the unemployment rate does not rise continually.C) the price level rises continually.D) the United States does not experience more than one negative supply shock per decade. Answer: CQues Status: Previous Edition8) Inflation occurs wheneverA) the price level

9、rises.B) the money supply increases.C) the price level rises continuously over a period of time.D) the price level falls continuously over a period of time. Answer: CQues Status: Previous Edition9) Evidence strongly supports the view that countries with high inflation also haveA) the lowest nominal

10、interest rates.B) the highest rates of money growth.C) the smallest budget deficits.D) the lowest interest rates. Answer: BQues Status: Previous Edition10) Countries with the highest inflation rates are likely to haveA) the highest rates of money growth.B) small budget deficits relative to GDP.C) th

11、e lowest interest rates.D) nonaccommodating monetary policy. Answer: AQues Status: Previous Edition11) The proposition that inflation is the result of a high rate of money growth isA) not supported by evidence from the German hyperinflation.B) held only by sociologists and is no longer believed by e

12、conomists.C) supported by evidence from inflationary episodes throughout the world.D) largely a political fabrication designed to make the Fed a scapegoat for poor fiscal policy. Answer: CQues Status: Previous Edition12) Which of the following would provide the strongest evidence that rapid money gr

13、owth is the driving force behind inflation?A) An endogenous increase in the money supply that preceded the onset of inflation.B) An exogenous increase in the money supply that preceded the onset of inflation.C) An endogenous increase in the money supply that lagged the onset of inflation.D) An exoge

14、nous increase in the money supply that lagged the onset of inflation. Answer: BQues Status: Previous Edition13) The Zimbabwean hyperinflation of 2008 supports the proposition that excessive monetary growth causes inflation and not the other way around since the increase in monetary growth appears to

15、 have beenA) unintentional.B) intentional.C) endogenous.D) exogenous.Answer: DQues Status: Revised14) The German hyperinflation of 1921-1923 provides important support for the view that high money growth results whenA) the government sets an employment target that is too high.B) the government expan

16、ds the money supply to finance its expenditures.C) the government raises taxes to finance its expenditures.D) the government sells bonds to the public. Answer: BQues Status: Previous Edition24.2 Meaning of Inflation1) A one-time increase in the price levelA) is rarely reported by the news media as i

17、nflation, but is nevertheless considered to be inflation by economists.B) is regularly reported by the news media as inflation, but is not considered to be inflation by economists.C) is rarely reported by the news media as inflation because it is not considered to be inflation by economists.D) is re

18、gularly reported by the news media as inflation because it is considered to be inflation by economists.Answer: BQues Status: Previous Edition2) When inflation is defined to be a condition of a continually rising price level, economists agree with Milton Friedmans proposition that inflation is a mone

19、tary phenomenon.A) noB) very fewC) about half of practicingD) almost all Answer: DQues Status: Previous Edition24.3 Views of Inflation1) According to aggregate demand and supply analysis, inflation is caused byA) supply shocks.B) expansionary fiscal policies.C) expansionary monetary policies.D) risi

20、ng prices.Answer: CQues Status: Previous Edition2) According to aggregate demand and supply analysis, a continually increasing money supply causes a in aggregate demand, everything else held constant.A) continual increaseB) continual decreaseC) one-time increaseD) one-time decrease Answer: AQues Sta

21、tus: Previous Edition3) According to aggregate demand and supply analysis of inflation and with everything else held constant, a continually increasing money supply causesA) aggregate demand to increase along a stationary aggregate supply curve, leading to continually increasing aggregate output and

22、 prices.B) aggregate supply to decrease along a stationary aggregate demand curve, leading to continually contracting aggregate output and prices.C) aggregate demand to increase continually as aggregate supply decreases continually, leading to higher and higher price levels.D) aggregate demand to de

23、crease continually as aggregate supply increases continually, leading to higher and higher price levels.Answer: CQues Status: Previous Edition4) Aggregate demand and supply analysis conclude that continuously growing will cause the price level to rise continually, thus generating inflation.A) money

24、supplyB) government spendingC) interest ratesD) consumer expenditure Answer: AQues Status: Revised5) According to aggregate demand and supply analysis and with everything else held constant, a continuous increase in the money supply causesA) the price level to increase, but has no lasting effect on

25、the inflation rate.B) the price level to fall.C) inflation.D) output to increase, but leaves the price level and inflation unchanged. Answer: CQues Status: Previous Edition6) According to aggregate demand and supply analysis, an increase in government spending will cause aggregate demand to , causin

26、g output to , everything else held constant.A) increase; fallB) increase; riseC) decrease; fallD) decrease; rise Answer: BQues Status: Previous Edition7) Aggregate demand and supply analysis indicates that negative supply shocksA) decrease the price level, but cannot decrease the inflation rate.B) i

27、ncrease the price level, but cannot increase the inflation rate.C) increase both the price level and the inflation rate.D) decrease both the price level and the inflation rate. Answer: BQues Status: Previous Edition8) Suppose that the economy is at the natural rate of output. In the absence of accom

28、modating policy and everything else held constant, the net result of a negative supply shock is thatA) the economy returns to full employment at the initial price level.B) the economy returns to full employment at a higher price level.C) the economy returns to full employment at a lower price level.

29、D) aggregate output increases above the natural rate level, but only temporarily. Answer: AQues Status: Previous Edition9) Explain and show graphically why continuous monetary growth is needed to generate inflation. Describe how the inflation process is generated.Answer: See figure below.Only contin

30、uous monetary growth can cause continuous increases in aggregate demand of the sort needed to generate inflation. Other factors can increase demand and the price level, but none can increase demand continuously. In the graph, the monetary expansion increases AD. The increase in output above the natu

31、ral rate increases wages and decreases AS. Monetary expansion increases AD repeatedly, and wages continue to adjust upward.Ques Status: Previous Edition10) Suppose that the economy is at the natural rate of output. Explain how a positive supply shock, followed by a more restrictive monetary policy, allows policymakers a painless way to reduce inflation.Answer: The positive supply shock increases aggregate supply, exerting downward pressure on prices. Policymakers can now reduce demand to further reduce inflationary pressure without reducing output below the natural rate.Ques Status: