12. If an inflationary gap exists and policymakers decided to use Neo-Keynesian
ID: 1160157 • Letter: 1
Question
12. If an inflationary gap exists and policymakers decided to use Neo-Keynesian Theory to solve the problem, most likely, they would choose to implement (expansionary/ contractionary / free market Money Supply Rule) fiscal policy and/or a (expansionary/ contractionary / free market/ Money Supply Rule) monetary policy with the objective of shifting the(AD / AS / Laffer/ Philips) curve to the_ (right / left / up / down). 1 3. was the name of the economist most closely associated with Monetarist Theory. This economist is often closely associated with which university? 14. The Modern Quantity Theory (MQT) equation looks very much like the original Crude Quantity Theory (CQT) however the assumptions for the MQT stated (1)and (2)__ Monetarist Theory believes in discretionary monetary policy. True or false. Of all the macroeconomic theories, which one(s) focus on shifting the AD 15. 16. curve to resolve economic problems?Explanation / Answer
12.
If there exists an inflationary gap in the economy then policy makers in order to solve the problem would most likely implement a (1) contractionary fiscal policy or an (2) expansionary monetary policy with an objective to shift (3) AS curve to the (4) right.
13.
Milton Friedman is a famous monetarist which formulated that excessive expansion of aggregate demand leads to inflation so the monetary authority should focus on price stability.
14.
assumptions of the modern quantity theory of money are as; (1) price is a passive factor which is affected by other factors. (2) supply of money is exogenously determined.
15.
False. The monetarist theory believes that the target of monetary policy is best served when focus lies on the rate of growth of money supply rather on discretionary monetary policy. As money supply has a major influence on output in the short run and price level in the long run.
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