Monetarists argue that fiscal policy is ineffective because Question 10 options:

Question

Monetarists argue that fiscal policy is ineffective because

Question 10 options:

A) the crowding-out effect reduces investment.

B) the velocity of money is predictable.

C) prices and wages are sticky in the short run.

D) it causes the value of the dollar to depreciate.

Monetarists argue that changes in the money supply

Question 8 options:

A) must be adjusted frequently in response to ever-changing economic conditions.

B) stimulate aggregate demand indirectly, through changes in interest rates and investment.

C) have a direct impact on aggregate demand.

D) have little impact on the inflation rate.

If the Fed follows a monetary rule, it will

Question 7 options:

A) change the money supply as needed to combat recessions.

B) have absolute control over the money supply.

C) target a rate at which they believe the money supply should grow and stick to it.

D) try to make the money supply grow at approximately twice the potential growth rate of real GDP.

Explanation / Answer

10. The right answer is A) the crowding-out effect reduces investment.

Explanation: Crowding-out effect refers to the phenomenon that when government's expansionary fiscal policies raise interest rate and reduce private borrowing and investment. The overall effect of crowding out is the overall low investment in the economy.

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