Question :
27) If an economist were interested in testing whether government : 1373935
27) If an economist were interested in testing whether government budget deficits had been the cause of excessive monetary growth for a country for the period 1950-2000, she would examine the behavior of
A) the ratio of government spending to GDP.
B) the money supply-to-monetary-base ratio.
C) interest rates.
D) the government debt-to-GDP ratio.
28) Evidence from episodes of hyperinflation indicates that
A) wage-push demands have been the ultimate source of inflationary monetary policies.
B) supply shocks have been the ultimate source of inflationary monetary policies.
C) huge government budget deficits have been the ultimate source of inflationary monetary policies.
D) there is no common source of inflationary monetary policies.
29) Analysis of episodes of hyperinflation indicate that the rapid money growth leading to the inflation is the result of
A) governments financing massive budget deficits by printing money.
B) central banks’ attempts to peg interest rates.
C) central banks’ attempts to peg exchange rates.
D) increases in taxes.
30) Although the U.S. has a well-developed government bond market and has experienced relatively small budget deficits relative to GDP, deficits can be inflationary if
A) deficits put upward pressure on interest rates, and the Fed attempts to keep interest rates from rising.
B) deficits put upward pressure on interest rates, and fiscal authorities raise taxes in an attempt to keep interest rates from rising.
C) the Fed refuses to purchase government bonds.
D) the world’s supply of gold expands because of new gold discoveries.
31) Moderate deficits, such as those experienced by the United States in the last decade, present an inflationary problem if
A) they put upward pressure on interest rates, and the Fed has a goal of preventing high interest rates.
B) they put upward pressure on interest rates, and the Fed has a goal of preventing interest rates from falling too low.
C) the Fed responds by reducing the growth of high-powered money.
D) the Fed cuts money growth to offset the expansionary fiscal effects.
32) If moderate deficits put ________ pressure on interest rates, the Fed may ________ bonds, leading to an increase in high-powered money.
A) upward; sell
B) upward; buy
C) downward; sell
D) downward; buy
33) If moderate deficits put upward pressure on interest rates, the Fed may ________ bonds, leading to a ________ in high-powered money.
A) sell; fall
B) buy; fall
C) sell; rise
D) buy; rise
34) If the Fed pursues a policy goal of
A) preventing high interest rates, and deficits cause interest rates to rise, then deficits will lead to money creation.
B) preventing high inflation, and deficits cause inflation to rise, then deficits will lead to money creation.
C) preventing high bond prices, and deficits cause bond prices to rise, then deficits will lead to money creation.
D) preventing high stock prices, and deficits cause stock prices to rise, then deficits will lead to money creation.
