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Unformatted text preview: Chapter 25 Money and Inflation 25.1 Money and Inflation: Evidence 1) The condition of a continually rising price level is defined as A) stagflation. B) stagnation. C) disinflation. D) inflation. Answer: D Ques Status: Previous Edition 2) The economist who proposed that, ʺ Inflation is always and everywhere a monetary phenomenon ʺ was A) John Maynard Keynes. B) John R. Hicks. C) Milton Friedman. D) Franco Modigliani. Answer: C Ques Status: Previous Edition 3) Complete Milton Friedman ʹ s famous proposition: ʺ Inflation is always and everywhere a ________ phenomenon. ʺ A) monetary B) political C) policyD) budgetary Answer: A Ques Status: Previous Edition 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. Answer: A Ques Status: Previous Edition 5) ʺ 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? ʺ Milton Friedman ʹ 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 ʹ 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 ʹ 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. Answer: C Ques Status: Previous Edition 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. Answer: C Ques Status: Revised 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. Answer: B Ques Status: Previous Edition 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) nonaccomodating monetary policy. small budget deficits relative to GDP....
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