Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 15, Problem 16QP
To determine
The problems arising from decline in nominal
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Students have asked these similar questions
True or False? In an assigned reading, Milton
Friedman indicated that he agreed with John
Maynard Keynes's explanation of the causes of
the Great Depression.
True
False
As discussed in class, which of the following was
argued by monetarists of the 1970s?
in a free market economy, central banks
can never effectively manipulate money
supply, because lending activity is subject
to rapid changes
an expansion of the money supply that is
less than the growth of output during the
same period will generally result in
deflation
O effects of changes in money supply are
seen in output before they are seen in
prices
central banks should focus on minimizing
the legal interest rates paid to depositors,
as ensuring the safety of banks was the
most important goal
According to Monetarists, what should the government do if unemployment is 4% and inflation is 12%?
Select one:
a. Decrease the supply of money
b. Decrease government spending
c. Raise taxes
d. Do nothing
e. Lower interest rates
Why did Friedman and the Monetarists believe that monetary misuse accompanied every severe recession every significant inflation over the past century?
Chapter 15 Solutions
Macroeconomics
Ch. 15.1 - Prob. 1STCh. 15.1 - Prob. 2STCh. 15.1 - Prob. 3STCh. 15.4 - Prob. 1STCh. 15.4 - Prob. 2STCh. 15.4 - Prob. 3STCh. 15 - Prob. 1QPCh. 15 - Prob. 2QPCh. 15 - Prob. 3QPCh. 15 - Prob. 4QP
Ch. 15 - Prob. 5QPCh. 15 - Prob. 6QPCh. 15 - Prob. 7QPCh. 15 - Prob. 8QPCh. 15 - Prob. 9QPCh. 15 - Prob. 10QPCh. 15 - Prob. 11QPCh. 15 - Prob. 12QPCh. 15 - Prob. 13QPCh. 15 - Prob. 14QPCh. 15 - Prob. 15QPCh. 15 - Prob. 16QPCh. 15 - Prob. 17QPCh. 15 - Prob. 18QPCh. 15 - Prob. 1WNGCh. 15 - Prob. 2WNGCh. 15 - Prob. 3WNGCh. 15 - Prob. 4WNGCh. 15 - Prob. 5WNGCh. 15 - Graphically portray the Keynesian transmission...Ch. 15 - Prob. 7WNGCh. 15 - Prob. 8WNG
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Similar questions
- Discuss the unintended consequences of the various monetary interventions implemented.arrow_forwardMilton Friedman, the leader for Monetarism had proposed several important arguments regarding the implementation of Monetary Policy. The arguments were listed as: Proposition 1: Monetary Policy has powerful short-run effects on the real economy. In the long run, however, changes in the money supply have their primary effect on the price level. Proposition 2: Despite the powerful short-run effect of money on the economy, there is little scope for using Monetary Policy actively to try to smooth business cycle. Proposition 3: Even if there is some scope for using Monetary Policy to smooth business cycles, the Central Bank (the Federal Reserve) cannot be relied on to do so effectively. Proposition 4: The Central Bank (the Federal Reserve) should choose a specific monetary aggregate (such as M1 or M2) and commit itself to making that aggregate grow at a fixed percentage rate, year in and year out. Keynesians economists’ response to the above propositions with this statement: “Monetary…arrow_forwardExplain the monetaey policyarrow_forward
- Do Monetarists and Keynesians believe that inflation is always and everywhere a monetary phenomenon? Explain your position with the aid of diagram(s).arrow_forwardTrue or False? Because the central bank uses the nominal interest rate as its policy instrument, the nominal interest rate is the transmission mechanism of monetary policy.arrow_forwardWhich of these is an alternative to monetary policy and aims to reduce inflation? reduce the money supply raise government purchases reduce taxes increase taxesarrow_forward
- What is a monetary rule? What is its purpose? Illustrate and explain the implementation of a monetary rule.arrow_forwardHow can monetary policy address the problem of inflation?arrow_forwardMost central banks, like the Bank of England, set targets for their economy's inflation rate. The Bank of England has an inflation target of 3.5% per year. According to the Quantity Theory of Money, by how much must the Bank of England grow the money stock in order to hit its inflation target? The Bank of England must decrease the money stock by 3.5% per year. The Bank of England must increase the money stock by 3.5% per year. The Bank of England must decrease the money stock by 3.5% per month. The Bank of England must increase the money stock by 3.5% per month.arrow_forward
- What is the basic objective of monetary policy? What are the major strengths of monetary policy? Why is monetary policy easier to conduct than fiscal policy?arrow_forwardExplain the difference between the Keynesian and the monetarist views on how an increase in the money supply causes inflation.arrow_forwardthe government of a country increases the growth rate of the money supply from 5 percent per year to 50 percent per year. what happened to prices?arrow_forward
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