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1 | | The quantity theory of money says that changes in ___________ lead to equivalent changes in __________, but have no effect on ___________ |
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| | A) | prices, wages, output and employment |
| | B) | output, prices, employment |
| | C) | nominal money, the price level, output and employment |
| | D) | nominal money, output, prices |
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2 | | Monetarists believe that a reduction in _____________can be achieved by reducing ________ |
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| | A) | unemployment, prices |
| | B) | inflation, wages |
| | C) | unemployment, wages |
| | D) | inflation, nominal money |
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3 | | If it is observed that there is a strong association between nominal money growth and nominal interest rates, then we have observed evidence in support of _____________ |
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| | A) | the quantity theory of money |
| | B) | the Phillips hypothesis |
| | C) | the Fisher hypothesis |
| | D) | the classical model |
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4 | | During periods of rising inflation and rising interest rates we expect the demand for real cash to |
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| | A) | rise |
| | B) | fall |
| | C) | not change |
| | D) | fluctuate |
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5 | | Governments may contribute to inflationary pressure on account of building up large _________ |
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| | A) | numbers of employees |
| | B) | welfare plans |
| | C) | budget deficits |
| | D) | expenditure |
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6 | | The Phillips curve shows the trade-off between ____________ and ____________ |
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| | A) | the inflation rate, interest rates |
| | B) | the inflation rate, the unemployment rate |
| | C) | interest rates, output |
| | D) | output, employment |
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7 | | The long-run Phillips curve is __________ at the ________________ |
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| | A) | horizontal, natural rate of inflation |
| | B) | horizontal, natural rate of unemployment |
| | C) | vertical, natural rate of inflation |
| | D) | vertical, natural rate of unemployment |
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8 | | The short run Phillips curve can shift in response to changes in ____________ |
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| | A) | Inflationary expectations |
| | B) | unemployment |
| | C) | the inflation rate |
| | D) | wage rates |
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9 | | The costs of inflation are |
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| | A) | shoe leather costs |
| | B) | menu costs |
| | C) | income redistribution |
| | D) | uncertainty |
| | E) | all of the above |
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10 | | Faster nominal money growth leads to either higher inflation or higher nominal interest rates, but not both |
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| | A) | TRUE |
| | B) | FALSE |
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11 | | The natural rate of unemployment, the rate of unemployment in long run equilibrium is determined by the underlying rate of inflation |
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| | A) | TRUE |
| | B) | FALSE |
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12 | | Only an incomes policy can deliver low inflation in the long run |
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| | A) | TRUE |
| | B) | FALSE |