Question:
1. According to Baumol and Tobin, the transactions demand for money is
- negatively related to market interest rates, as is the velocity of money.
- positively related to market interest rates, but the velocity of money is negatively related to market interest rates.
- negatively related to market interest rates, but the velocity of money is positively related to market interest rates.
- positively related to market interest rates, as is the velocity of money.
2.In the mid 1990s, monthly inflation in Yugoslavia peaked at
- 300,000%.
- 300%.
- 313,000,000%.
- 30%.
3. Bracket creep
- results in a tax on money balances.
- invariably leads to an excess burden.
- is greater in 2001 than it was in 1971.
- would be zero if the same tax rate were applied to all income.
4.According to new classical economists, sustained expected increases in the nominal money supply will lead to
- sustained increases in prices, with no short-run increases in output.
- increases in output in the short run and sustained increases in prices in the long run.
- sustained increases in both prices and output in the long run.
- short-run increases in prices and output, with a stable price level and no increases in output in the long run.
5.During the early 1980s as interest-bearing checkable deposits were incorporated into the definition of M1,
- the demand for M1 balances decreased substantially.
- the demand for M1 balances increased substantially.
- the nominal return on M1 balances declined.
- the dollar value of M1 became greater than the dollar value of M2.
6. A rule specifying a constant rate of growth of M1 during the early 1980s
- was adopted in the United States, but not in Japan.
- would have resulted in greater inflation than actually occurred.
- was dropped following an acceleration in the inflation rate.
- would have resulted in a more contractionary policy than the one the Fed actually pursued.
7. According to the Ricardian equivalence proposition,
- a decline in the demand for money results in an equivalent increase in the demand for nonmoney assets.
- saving equals investment only at full employment.
- the increase in current income from a tax cut is offset by higher taxes in the future to pay off the debt.
- government spending is the equivalent of investment spending.
8. Keynes called the willingess of individuals to hold money to pay for unexpected transactions,
- the speculative motive.
- the transactions motive.
- the impulse motive.
- the precautionary motive.