ECO 4223 Exam 2 Questions and Answers.
In the model of fiat money developed in Lecture 7, the demand for money
is the demand to hold ________. - Correct Answer Irredeemable Paper
Bank Notes.
In the model of fiat money developed in Lecture 7, the supply of money is
just the total stock issued by the central bank because fiat monies
_________. - Correct Answer have no non-monetary uses.
Unlike the gold standard, there is _______ mechanism to govern the
supply of money in a fiat money regime. - Correct Answer no automatic
How a central bank conducts monetary policy will depend _____. - Correct
Answer on both the information available to policymakers and the
incentives policymakers face.
In the 1960s and early 1970s, most economists believed there was a
stable, exploitable tradeoff between _____ and ______. - Correct Answer
inflation, unemployment
In the 1970s, the United States experienced _________. - Correct Answer
stagflation
The (naiive) Phillips Curve was thought to represent a menu of policy
options, whereby policymakers could achieve a lower unemployment rate
so long as they were willing to put up with _________, and vice versa. -
Correct Answer higher inflation
Notable absent from the (naiive) Phillips Curve was a reasonable
assumption about _________. - Correct Answer Inflation Expectations
When inflation expectations decrease, the expectations augmented Phillips
Curve shifts ________. - Correct Answer down
The long run Phillips Curve is conventionally drawn as a ______ line that
intersects the axis at __________. - Correct Answer horizontal; the
natural rate of unemployment, U".
, According to Abrams (2006), political monetary (or business) cycle political
monetary cycle exists in the United States, but only when the President and
the _________ share party allegiance. - Correct Answer Federal Reserve
Chair
A country experiences hyperinflation when the price level grows more than
__________. - Correct Answer 50 percent per month
Use the rule of 70 to calculate approximately how long it will take prices to
double in a country with an inflation rate of 3 percent per month. - Correct
Answer 23.3 months
(70/3) months
Use the rule of 70 to calculate the approximate inflation rate in a country
that has seen its price level double in 12.1 years. - Correct Answer 5.8
percent per year
(70/12/1) per year
Use the rule of 70 to calculate the approximate inflation rate in a country
that has seen its price level quadruple in 15.9 years. - Correct Answer 8.8
percent per year.
15.9/2=7.95
70/7/95=8.8
When inflation is higher than expected, borrowers and employers typically
_______. - Correct Answer gain at the expense of lenders and employees
The federal reserve consists of the Board of Governors and the _________
regional Reserve Banks. Typically, _______ regional Reserve Bank
presidents serve as voting members on the Federal Open Market
Committee. - Correct Answer 12; 4
Businesses tend to overproduce when the purchasing power of money is
_______ expected. - Correct Answer less than
In the model of fiat money developed in Lecture 7, the demand for money
is the demand to hold ________. - Correct Answer Irredeemable Paper
Bank Notes.
In the model of fiat money developed in Lecture 7, the supply of money is
just the total stock issued by the central bank because fiat monies
_________. - Correct Answer have no non-monetary uses.
Unlike the gold standard, there is _______ mechanism to govern the
supply of money in a fiat money regime. - Correct Answer no automatic
How a central bank conducts monetary policy will depend _____. - Correct
Answer on both the information available to policymakers and the
incentives policymakers face.
In the 1960s and early 1970s, most economists believed there was a
stable, exploitable tradeoff between _____ and ______. - Correct Answer
inflation, unemployment
In the 1970s, the United States experienced _________. - Correct Answer
stagflation
The (naiive) Phillips Curve was thought to represent a menu of policy
options, whereby policymakers could achieve a lower unemployment rate
so long as they were willing to put up with _________, and vice versa. -
Correct Answer higher inflation
Notable absent from the (naiive) Phillips Curve was a reasonable
assumption about _________. - Correct Answer Inflation Expectations
When inflation expectations decrease, the expectations augmented Phillips
Curve shifts ________. - Correct Answer down
The long run Phillips Curve is conventionally drawn as a ______ line that
intersects the axis at __________. - Correct Answer horizontal; the
natural rate of unemployment, U".
, According to Abrams (2006), political monetary (or business) cycle political
monetary cycle exists in the United States, but only when the President and
the _________ share party allegiance. - Correct Answer Federal Reserve
Chair
A country experiences hyperinflation when the price level grows more than
__________. - Correct Answer 50 percent per month
Use the rule of 70 to calculate approximately how long it will take prices to
double in a country with an inflation rate of 3 percent per month. - Correct
Answer 23.3 months
(70/3) months
Use the rule of 70 to calculate the approximate inflation rate in a country
that has seen its price level double in 12.1 years. - Correct Answer 5.8
percent per year
(70/12/1) per year
Use the rule of 70 to calculate the approximate inflation rate in a country
that has seen its price level quadruple in 15.9 years. - Correct Answer 8.8
percent per year.
15.9/2=7.95
70/7/95=8.8
When inflation is higher than expected, borrowers and employers typically
_______. - Correct Answer gain at the expense of lenders and employees
The federal reserve consists of the Board of Governors and the _________
regional Reserve Banks. Typically, _______ regional Reserve Bank
presidents serve as voting members on the Federal Open Market
Committee. - Correct Answer 12; 4
Businesses tend to overproduce when the purchasing power of money is
_______ expected. - Correct Answer less than
