Reference no: EM131036663

Question:

1. According to Baumol and Tobin, the transactions demand for money is

• negatively related to market interest rates, as is the velocity of money.
• positively related to market interest rates, but the velocity of money is negatively related to market interest rates.
• negatively related to market interest rates, but the velocity of money is positively related to market interest rates.
• positively related to market interest rates, as is the velocity of money.

2.In the mid 1990s, monthly inflation in Yugoslavia peaked at

• 300,000%.
• 300%.
• 313,000,000%.
• 30%.

3. Bracket creep

• results in a tax on money balances.
• invariably leads to an excess burden.
• is greater in 2001 than it was in 1971.
• would be zero if the same tax rate were applied to all income.

4.According to new classical economists, sustained expected increases in the nominal money supply will lead to

• sustained increases in prices, with no short-run increases in output.
• increases in output in the short run and sustained increases in prices in the long run.
• sustained increases in both prices and output in the long run.
• short-run increases in prices and output, with a stable price level and no increases in output in the long run.

5.During the early 1980s as interest-bearing checkable deposits were incorporated into the definition of M1,

• the demand for M1 balances decreased substantially.
• the demand for M1 balances increased substantially.
• the nominal return on M1 balances declined.
• the dollar value of M1 became greater than the dollar value of M2.

6. A rule specifying a constant rate of growth of M1 during the early 1980s

• was adopted in the United States, but not in Japan.
• would have resulted in greater inflation than actually occurred.
• was dropped following an acceleration in the inflation rate.
• would have resulted in a more contractionary policy than the one the Fed actually pursued.

7. According to the Ricardian equivalence proposition,

• a decline in the demand for money results in an equivalent increase in the demand for nonmoney assets.
• saving equals investment only at full employment.
• the increase in current income from a tax cut is offset by higher taxes in the future to pay off the debt.
• government spending is the equivalent of investment spending.

8. Keynes called the willingess of individuals to hold money to pay for unexpected transactions,

• the speculative motive.
• the transactions motive.
• the impulse motive.
• the precautionary motive.