Question : 24.1   Money and Inflation: Evidence 1) The condition of a continually : 1373930

24.1   Money and Inflation: Evidence

 

1) The condition of a continually rising price level is defined as

A) stagflation.

B) stagnation.

C) disinflation.

D) inflation.

 

2) The economist who proposed that, “Inflation is always and everywhere a monetary phenomenon” was

A) John Maynard Keynes.

B) John R. Hicks.

C) Milton Friedman.

D) Franco Modigliani.

 

3) Complete Milton Friedman’s famous proposition: “Inflation is always and everywhere a ________ phenomenon.”

A) monetary

B) political

C) policy

D) budgetary

 

4) At first cut, the simple solution to fighting inflation is

A) reducing the growth rate of the money supply.

B) limiting the number of terms that politicians can serve in elective office.

C) returning the economy to barter by prohibiting the use of fiat money.

D) to impose price controls on businesses that attempt to raise prices.

 

5) “How do we prevent the inflationary fire from igniting again and stop the roller coaster ride in the inflation rate of the last 40 years?” Milton Friedman’s famous proposition suggests the simple solution:

A) reduce the number of terms that politicians are allowed to serve.

B) reduce the growth rate of the money supply.

C) reduce the marginal tax rate on low-income wage earners.

D) increase the marginal tax rates on businesses that hike prices in excess of 5 percent per year.

6) Milton Friedman’s proposition concerning the cause of inflation implies a simple solution to the inflation problem:

A) reduce government budget deficits.

B) limit the ability of fiscal policymakers to bring pressure to bear on the monetary authority.

C) limit the number of terms that politicians are allowed to serve.

D) reduce the growth rate of the money supply.

 

7) Milton Friedman’s proposition that inflation is always and everywhere a monetary phenomenon holds only if

A) government budget deficits do not rise continually.

B) the unemployment rate does not rise continually.

C) the price level rises continually.

D) the United States does not experience more than one negative supply shock per decade.

 

8) Inflation occurs whenever

A) the price level rises.

B) the money supply increases.

C) the price level rises continuously over a period of time.

D) the price level falls continuously over a period of time.

 

9) Evidence strongly supports the view that countries with high inflation also have

A) the lowest nominal interest rates.

B) the highest rates of money growth.

C) the smallest budget deficits.

D) the lowest interest rates.

 

10) Countries with the highest inflation rates are likely to have

A) the highest rates of money growth.

B) small budget deficits relative to GDP.

C) the lowest interest rates.

D) nonaccommodating monetary policy.

 

 

11) The proposition that inflation is the result of a high rate of money growth is

A) not supported by evidence from the German hyperinflation.

B) held only by sociologists and is no longer believed by economists.

C) supported by evidence from inflationary episodes throughout the world.

D) largely a political fabrication designed to make the Fed a scapegoat for poor fiscal policy.

12) Which of the following would provide the strongest evidence that rapid money growth is the driving force behind inflation?

A) An endogenous increase in the money supply that preceded the onset of inflation.

B) An exogenous increase in the money supply that preceded the onset of inflation.

C) An endogenous increase in the money supply that lagged the onset of inflation.

D) An exogenous increase in the money supply that lagged the onset of inflation.

 

13) The Zimbabwean hyperinflation of 2008 supports the proposition that excessive monetary growth causes inflation and not the other way around since the increase in monetary growth appears to have been

A) unintentional.

B) intentional.

C) endogenous.

D) exogenous.

 

14) The German hyperinflation of 1921-1923 provides important support for the view that high money growth results when

A) the government sets an employment target that is too high.

B) the government expands the money supply to finance its expenditures.

C) the government raises taxes to finance its expenditures.

D) the government sells bonds to the public.

 

 

 

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