_____10. The monetarist program undertaken during the 1979-1982 period resulted
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Question
_____10. The monetarist program undertaken during the 1979-1982 period resulted in:
a reduction in the inertial rate of inflation.
a dramatic rise in unemployment.
very high interest rates.
all of the above.
none of the above.
_____11. Some economists have suggested replacing the emphasis on controlled money supply as found in monetarism with controlled growth in nominal GDP. Money supply targets, then:
would be determined so as to attain the desired nominal GDP level.
would be eliminated.
could be set arbitrarily.
would be settled on following the discovery of an acceptable level of unemployment.
all of the above are true.
____12. Which of the following is NOT a keystone of monetarism?
The money supply is the determinant of nominal GDP growth.
Fiscal policy can raise interest rates and thereby raise velocity.
Prices and wages are relatively stable.
The private sector is relatively stable.
All of the above are keystones.
_____13. It follows from the assumptions of the rational-expectations macroeconomics that:
most unemployment is voluntary.
monetary policy can work in the short run but not in the long run.
fiscal policy is hamstrung because of delays in the legislative process in Congress.
all policy that is predictable will be undone by clever citizens.
all are true.
_____14. Which of the following is true according to monetarist theory?
The IS curve is quite steep while the LM Curve is relatively flat.
Changes in the money supply have their greatest effect on prices.
Fiscal policy can do little to improve economic conditions, but much to worsen them.
Real GDP stays at or near potential output most of the time.
All of the above are true.
Explanation / Answer
The answer for the first question is a) that is
a reduction in the inertial rate of inflation.
Paul Volcker, while chairman of the Board of Governors of the federal reserve system (1979–1987), was often called the second most powerful person in the United States. Volcker and company triggered the “double-dip” recessions of 1980 and 1981–1982, vanquishing the double-digit inflation of 1979–1980 and bringing theunemployment rate into double digits for the first time since 1940. Volcker then declared victory over inflation and piloted the economy through its long 1980s recovery, bringing unemployment below 5.5 percent, half a point lower than in the 1978–1979 boom.
. Some economists have suggested replacing the emphasis on controlled money supply as found in monetarism with controlled growth in nominal GDP. Money supply targets, then:
a) would be determined so as to attain the desired nominal GDP level.
12. Which of the following is NOT a keystone of monetarism?
Fiscal policy can raise interest rates and thereby raise velocity.
It follows from the assumptions of the rational-expectations macroeconomics that:
most unemployment is voluntary.
All are true is the right answer.
Which of the following is true according to monetarist theory?
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