Exam 32: The Debate over Monetary and Fiscal Policy

When something happens to the economy, monetarists ask two questions:

According to the simple quantity theory of money, a change in the money supply of 9.6 percent would lead to a

An expansionary monetary policy is most likely to produce an inflationary effect with little impact on output when the economy

What role does ideology play in the debate on stabilization?

According to the quantity theory of money, a decision on the part of all business firms currently paying employees on a monthly basis to begin paying on a weekly basis would be expected to

Which is likely to be larger, the velocity of M₁ or M2?

The velocity of circulation is the

The "Taylor rule" for monetary policy provides the Fed with a

The equation of exchange is written as

The optimal time for the implementation of contractionary fiscal policy would be

Some economists believe that policy makers should avoid stabilization policy because

During the financial crisis of 2007-2009 the interest rate on mortgage-backed securities had

The major limitation of both the Keynesian approach and the monetarist approach is that both

In a typical year, how accurate are forecasts of inflation and real GDP?

If the aggregate supply curve is flat,

How do advocates of discretionary stabilization policy view frequent changes in spending and tax policy?

The substantial fluctuations in velocity make the equation of exchange more useful in predicting changes in nominal GDP.

During the financial crisis of 2007-2009, both fiscal and monetary policy turned more expansionary.

Economists who focus their analyses on the effects of a change in the money supply and velocity are called

Advocates of activist policy making point to the swift response of the Fed after September 11, 2001, as an example of effective policy making.