Chat with AIExam 15: The Debate Over Monetary and Fiscal Policy
Define the following terms and explain their importance to the study of macroeconomics:
a.
velocity
b.
equation of exchange
c.
monetarism
d.
automatic stabilizer
(32) 
Verifieda. Velocity is the number of times per year that an "average dollar" is spent on goods and services.It is calculated as the ratio of nominal GDP to the money supply.The value of the velocity number is very important in the equation of exchange. b. The equation of exchange states that the money value of goods and services demanded in the economy must equal the size of the money supply times the value of velocity.This equation underlies the monetarist theory of how money affects the macroeconomy. c. Monetarism is a method of analysis that emphasizes the equation of exchange as an explanatory theory of the macroeconomy.In contrast to Keynesian analysis,monetarism sees the stock of money as the most important determinant of the level of nominal GDP and prices.Like Keynesian analysis,it focuses on the aggregate demand side of the economy. d. An automatic stabilizer is any government program that serves to stabilize aggregate demand without policy makers having to make new decisions or take new actions.An example of automatic stabilizers would be unemployment benefits.In a recession,benefits would increase to support aggregate demand when private incomes are falling.
For both Keynesians and monetarists to predict accurately the effects of a change in the money supply on the price level,they need to add ____ to their analysis.
(35) VerifiedD
The most common estimate of the value of transactions used to estimate velocity is
(34) VerifiedC
Some economists believe that policy makers should avoid stabilization policy because
(32) If you divide the amount of nominal GDP by the stock of money,you have computed the
(36) How will an increase in the efficiency of the payments mechanism effect velocity?
(24) Many economists believe that stabilization policy should be limited in scope until
(34) A contractionary monetary policy is most likely to reduce output with little impact on inflation when the economy
(33) In response to the Great Recession of 2007-2009,when did the Federal Reserve first cut the federal funds rate to zero?
(38) How do advocates of discretionary stabilization policy view frequent changes in spending and tax policy?
(35) Many banks offer accounts featuring "Automatic Transfer from Savings" allowing customers to overdraw checking accounts and the bank will transfer enough funds to cover the check automatically.Most likely,what is the effect of this feature on velocity?
(33) In utilizing unconventional monetary policy in 2010,the Federal Reserve purchased
(31) In the short run,an increase in the quantity of money normally
(36) After September 11,2001,a small group of economists argued that the economy's self-correcting mechanism would work to counteract the recessionary effects of the attack.
(33) Which of the following leads to a fundamental difficulty for stabilization policy?
(40) Which of the following is the order of fastest to slowest acting policy,once enacted,in affecting aggregate demand?
(35) The major difference between the Keynesian approach and the monetarist approach is that
(27) In 2007-2009,the Fed cut interest rates to limit the international financial crisis.What is the effect of this on velocity?
(30) It is often reported by financial news reports that higher interest rates reduce automobile sales.If this is true,we can expect
(33) 
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