Monetarists argue that the Federal Reserve should allow the money supply to grow:

Monetarists argue that the Federal Reserve should allow the money supply to grow:
 a. counter to the business cycles.
  b. faster than 10 percent annually.
  c. only during recessions.
  d. at a constant rate.

QUESTION 2

Full employment is the situation in which the economy operates at an unemployment rate equal to the sum of:
 a. structural and frictional unemployment.
  b. cyclical and frictional unemployment.
  c. structural and cyclical unemployment.
  d. structural, frictional, and cyclical unemployment.

QUESTION 3

Assume the marginal propensity to consume (MPC) is 0.80 and the government cuts taxes by 100 billion. The aggregate demand curve will shift to the:
 a. right by 80 billion.
  b. left by 200 billion.
  c. right by 400 billion.
  d. left by 400 billion.
  e. None of these.

QUESTION 4

The monetary rule is the view of the:
 a. Keynesians that monetary policy is most important.
  b. Monetarists that monetary policy is most important.
  c. Classical economists that monetary policy is most important.
  d. Monetarists that the Fed should expand the money supply at a constant rate.

QUESTION 5

The natural rate of unemployment occurs if there is no:
 a. unemployment.
  b. frictional unemployment.
  c. structural unemployment.
  d. cyclical unemployment.

QUESTION 6

Assume the marginal propensity to consume (MPC) is 0.75 and the government cuts taxes by 250 billion. The aggregate demand curve will shift to the:
 a. right by 1,000 billion.
  b. right by 750 billion.
  c. left by 1,000 billion.
  d. left by 750 billion.

QUESTION 7

Monetarists and classical economists:
 a. assume that stimulative monetary policy will create high levels of GDP without inflation.
  b. assume that stimulative monetary policy will create high levels of GDP and slightly high prices.
  c. assume the economy operates at full employment and stimulative monetary policy will only cause the price level to rise.
  d. assume that the economy operates at full employment and stimulative monetary policy will increase both aggregate supply and aggregate demand.
  e. assume that the Keynesian description of monetary policy underestimates the true stimulative effect of an increase in the money supply.

QUESTION 8

The combination of frictional and structural unemployment is the:
 a. cyclical rate of unemployment.
  b. transitional rate of unemployment.
  c. civilian rate of unemployment.
  d. natural rate of unemployment.