Exam 31: The Debate Over Monetary and Fiscal Policy

The quantity theory of money is a theory asserting that the quantity of money available determines the price level and the growth rate in the quantity of money determines the inflation rate.

The setting of the level of government spending and taxation by government policymakers is known as

Over long periods of time, M2 velocity has been relatively constant.

In 2009, nominal GDP was $14,050 billion and M1 was $1,587 billion. Velocity was

The efficiency of the payments' mechanism affects

Most economists think that it is impossible to prevent asset price bubbles.

The monetary stimulus enacted in the fall of 2001 provides support for those economists who favor

In 2007-2009, the Fed cut interest rates to limit the international financial crisis. What is the effect of this on velocity?

The alternatives of the active versus passive view of stabilization policy are usually expressed as

When the Fed decreases the money supply, interest rates

In utilizing unconventional monetary policy in 2010, the Federal Reserve purchased

In the presence of long lags, attempts at stabilizing the economy may actually destabilize it.

How do lags affect stabilization policy? Your answer should include three specific types of lags.

Stabilizing the economy by fiscal policy need not imply a tendency toward "big government."

_________ tend to be more intervention minded and hence more favorable disposed toward activist stabilization policies.

Asset price bubble is an increase in the price of assets that goes far beyond what can be justified by improving the fundamentals.

Contractionary fiscal policy would be most effective in decreasing inflation when

If the aggregate supply curve is flat,

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

How does government expenditure discourage some private investment?