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1、1 Economics of Money,Banking,and Financial Markets,11e,Global Edition(Mishkin)Chapter 24 Monetary Policy Theory 24.1 Response of Monetary Policy to Shocks 1)Policy makers cannot achieve both price stability and economic activity stability when facing A)temporary supply shocks.B)permanent supply shoc
2、ks.C)demand shocks.D)all of the above.Answer:A AACSB:Analytical Thinking 2)The disruption to financial markets starting in August 2007 that caused both consumer and business spending to fall A)shifted the aggregate demand curve to the right.B)shifted the aggregate demand curve to the left.C)shifted
3、the aggregate supply curve to the right.D)shifted the aggregate supply curve to the left.Answer:B AACSB:Reflective Thinking 3)When the economy is hit by a negative demand shock and the central bank does not respond by changing the autonomous component of monetary policy,then A)inflation will be lowe
4、r.B)output will be at its potential.C)output will be lower.D)inflation will not change.E)both A and B.Answer:E AACSB:Analytical Thinking 4)When the economy is hit by a negative demand shock and the central bank pursues policies to increase aggregate demand to its initial level,then A)inflation will
5、be lower.B)output will be at its potential.C)output will be lower.D)inflation will be unchanged.E)both B and D.Answer:E AACSB:Analytical Thinking 2 5)If the economy suffers a permanent negative supply shock because there is an increase in regulations that permanently reduce the level of potential ou
6、tput,then A)potential output falls.B)the long-run aggregate supply curve shifts leftward.C)the short-run aggregate supply curve shifts upward.D)all of the above.Answer:D AACSB:Analytical Thinking 6)When the economy suffers a permanent negative supply shock and the central bank does not respond by ch
7、anging the autonomous component of monetary policy,then A)inflation will be lower.B)output will be at its potential.C)output will be lower.D)inflation will not change.E)both A and B.Answer:C AACSB:Analytical Thinking 7)When the economy suffers a permanent negative supply shock and the central bank d
8、oes not respond by changing the autonomous component of monetary policy,then A)inflation will be lower.B)output will be at its potential.C)output will be lower.D)inflation will not change.E)both B and C.Answer:E AACSB:Analytical Thinking 8)When the economy suffers a permanent negative supply shock a
9、nd the central bank does not respond by changing the autonomous component of monetary policy,then A)inflation will be lower.B)output will be at its potential.C)output will be unchanged.D)inflation will be unchanged.Answer:B AACSB:Analytical Thinking 9)When the economy suffers a permanent negative su
10、pply shock and the central bank does not respond by changing the autonomous component of monetary policy,then A)inflation will be higher.B)output will be at its potential.C)output will be unchanged.D)inflation will be unchanged.E)both A and B.Answer:E AACSB:Analytical Thinking 3 10)When the economy
11、suffers a permanent negative supply shock and the central bank responds by changing the autonomous component of monetary policy to keep inflation at the target inflation rate,then A)aggregate demand curve shifts leftward.B)aggregate demand curve shifts rightward.C)output will be unchanged.D)both A a
12、nd C.Answer:A AACSB:Analytical Thinking 11)When the economy suffers a permanent negative supply shock and the central bank responds by changing the autonomous component of monetary policy to keep inflation at the target inflation rate,then A)aggregate demand curve shifts leftward.B)output will be un
13、changed.C)output will be at its potential.D)all of the above.E)both A and C.Answer:E AACSB:Analytical Thinking 12)When the economy is hit by a temporary negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then in the long run A)inflatio
14、n will be lower.B)output will be at its potential.C)output will be lower.D)inflation will be unchanged.E)both B and D.Answer:E AACSB:Analytical Thinking 13)When the economy suffers a temporary negative supply shock and the central bank responds by changing the autonomous component of monetary policy
15、 to keep inflation at the target inflation rate,then A)aggregate output drops in the short run.B)output will return to potential output over time.C)aggregate output is stabilized.D)all of the above.E)both A and B.Answer:E AACSB:Analytical Thinking 4 14)When the economy suffers a temporary negative s
16、upply shock,the central banks autonomous monetary policy to keep inflation at the target inflation rate leads to A)more stable economic activities.B)a large deviation of output from its potential.C)divine coincidence.D)both B and C.Answer:B AACSB:Analytical Thinking 15)When the economy suffers a tem
17、porary negative supply shock and the monetary policy makers try to stabilize economic activity in the short run,then A)aggregate demand curve shifts rightward.B)output will be at its potential.C)inflation rate will be higher.D)all of the above.E)both A and B.Answer:D AACSB:Analytical Thinking 16)Whi
18、ch of the following statements is CORRECT?A)If most shocks to the economy are aggregate demand shocks or permanent aggregate supply shocks,then policy that stabilizes inflation will also stabilize economic activity,even in the short run.B)If temporary supply shocks are more common,then a central ban
19、k must choose between stabilizing inflation and stabilizing output in the short run.C)Stabilizing economic activity in response to a temporary supply shock results in a larger deviation of inflation from the inflation target rather than a stabilization of inflation.D)all of the above.Answer:D AACSB:
20、Analytical Thinking 24.2 How Actively Should Policymakers Try to Stabilize Economic Activity?1)Nonactivists of the policies believe that A)wages and prices are very flexible.B)the self-correcting mechanism is very rapid.C)government action is unnecessary.D)all of the above.Answer:D AACSB:Reflective
21、Thinking 5 2)Activists of the policies believe that A)the self-correcting mechanism through wage and price adjustment is very slow.B)wages and prices are sticky.C)the government needs to pursue active policy to eliminate high unemployment when it develops.D)all of the above.Answer:D AACSB:Reflective
22、 Thinking 3)If aggregate output is below the natural rate level,activists of policies would recommend that the government A)do nothing.B)try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right.C)try to eliminate the high unemployment by attempting to shi
23、ft the aggregate demand curve to the right.D)try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the left.Answer:C AACSB:Analytical Thinking 4)If aggregate output is below the natural rate level,nonactivists of policies would recommend that the government A)do
24、 nothing.B)try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right.C)try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the right.D)try to eliminate the high unemployment by attempting to shift the aggregate deman
25、d curve to the left.Answer:A AACSB:Analytical Thinking 5)Nonactivists of policies contend that a policy of shifting the aggregate _ curve will be costly because it produces _ volatility in both the price level and output.A)supply;less B)supply;more C)demand;less D)demand;more Answer:D AACSB:Reflecti
26、ve Thinking 6 6)The existence of lags prevents the instantaneous adjustment of the economy to policies changing aggregate demand,thereby strengthening the case for A)supply-side policy.B)nonactivists.C)activists.D)demand-management policy.Answer:B AACSB:Reflective Thinking 7)The data lag is A)the ti
27、me it takes for policy makers to obtain data indicating what is happening in the economy.B)the time it takes for policy makers to be sure of what the data are signaling about the future course of the economy.C)the time it takes to pass legislation to implement a particular policy.D)the time it takes
28、 for policy makers to change policy instruments once they have decided on the new policy.E)the time it takes for the policy actually to have an impact on the economy.Answer:A AACSB:Reflective Thinking 8)The recognition lag is A)the time it takes for policy makers to obtain data indicating what is ha
29、ppening in the economy.B)the time it takes for policy makers to be sure of what the data are signaling about the future course of the economy.C)the time it takes to pass legislation to implement a particular policy.D)the time it takes for policy makers to change policy instruments once they have dec
30、ided on the new policy.E)the time it takes for the policy actually to have an impact on the economy.Answer:B AACSB:Reflective Thinking 9)The legislative lag represents A)the time it takes for policy makers to obtain data indicating what is happening in the economy.B)the time it takes for policy make
31、rs to be sure of what the data are signaling about the future course of the economy.C)the time it takes to pass legislation to implement a particular policy.D)the time it takes for policy makers to change policy instruments once they have decided on the new policy.E)the time it takes for the policy
32、actually to have an impact on the economy.Answer:C AACSB:Reflective Thinking 7 10)The implementation lag is A)the time it takes for policy makers to obtain data indicating what is happening in the economy.B)the time it takes for policy makers to be sure of what the data are signaling about the futur
33、e course of the economy.C)the time it takes to pass legislation to implement a particular policy.D)the time it takes for policy makers to change policy instruments once they have decided on the new policy.E)the time it takes for the policy actually to have an impact on the economy.Answer:D AACSB:Ref
34、lective Thinking 11)The effectiveness lag is A)the time it takes for policy makers to obtain data indicating what is happening in the economy.B)the time it takes for policy makers to be sure of what the data are signaling about the future course of the economy.C)the time it takes to pass legislation
35、 to implement a particular policy.D)the time it takes for policy makers to change policy instruments once they have decided on the new policy.E)the time it takes for the policy actually to have an impact on the economy.Answer:E AACSB:Reflective Thinking 12)The time it takes for policy makers to obta
36、in data indicating what is happening in the economy is called A)the data lag.B)the recognition lag.C)the legislative lag.D)the implementation lag.E)the effectiveness lag.Answer:A AACSB:Reflective Thinking 13)The time it takes for policy makers to be sure of what the data are signaling about the futu
37、re course of the economy is called A)the data lag.B)the recognition lag.C)the legislative lag.D)the implementation lag.E)the effectiveness lag.Answer:B AACSB:Reflective Thinking 8 14)The time it takes to pass legislation to implement a particular policy is called A)the data lag.B)the recognition lag
38、.C)the legislative lag.D)the implementation lag.E)the effectiveness lag.Answer:C AACSB:Reflective Thinking 15)The time it takes for policy makers to change policy instruments once they have decided on the new policy is called A)the data lag.B)the recognition lag.C)the legislative lag.D)the implement
39、ation lag.E)the effectiveness lag.Answer:D AACSB:Reflective Thinking 16)The time it takes for the policy actually to have an impact on the economy is called A)the data lag.B)the recognition lag.C)the legislative lag.D)the implementation lag.E)the effectiveness lag.Answer:E AACSB:Reflective Thinking
40、17)The nonactivists who opposed the recent fiscal stimulus package argue that A)fiscal stimulus would take too long to work because of long implementation lags.B)fiscal stimulus might kick in after the economy had already recovered.C)fiscal stimulus could lead to increased volatility in inflation an
41、d economic activity.D)all of the above.E)none of the above.Answer:D AACSB:Reflective Thinking 24.3 Inflation:Always and Everywhere a Monetary Phenomenon 1)The economist who proposed that,Inflation is always and everywhere a monetary phenomenon was A)John Maynard Keynes.B)John R.Hicks.C)Milton Friedm
42、an.D)Franco Modigliani.Answer:C AACSB:Reflective Thinking 9 2)Complete Milton Friedmans famous proposition:Inflation is always and everywhere a _ phenomenon.A)monetary B)political C)policy D)budgetary Answer:A AACSB:Reflective Thinking 24.4 Causes of Inflationary Monetary Policy 1)To say that inflat
43、ion is a monetary phenomenon seems to beg the question A)Why does inflationary monetary policy occur?B)Why do politicians seek reelection?C)Why is the Fed independent?D)Why does the U.S.Treasury print so much money?Answer:A AACSB:Analytical Thinking 2)The combination of a successful wage push by wor
44、kers and the governments commitment to high employment leads to A)demand-pull inflation.B)supply-side inflation.C)supply-shock inflation.D)cost-push inflation.Answer:D AACSB:Reflective Thinking 3)If workers do not believe that policymakers are serious about fighting inflation,they are most likely to
45、 push for higher wages,which will _ aggregate _ and lead to unemployment or inflation or both,everything else held constant.A)decrease;demand B)increase;demand C)decrease;supply D)increase;supply Answer:C AACSB:Reflective Thinking 4)If workers believe that government policymakers will increase aggre
46、gate demand to avoid a politically unpopular increase in unemployment when workers demand higher wages,then workers will not fear higher unemployment and their wage demands will result in A)demand-pull inflation.B)hyperinflation.C)deflation.D)cost-push inflation.Answer:D AACSB:Reflective Thinking 10
47、 5)If policymakers set a target for unemployment that is too low because it is less than the natural rate of unemployment,this can set the stage for a higher rate of money growth and A)cost-push inflation.B)demand-pull inflation.C)cost-pull inflation.D)demand-push inflation.Answer:B AACSB:Reflective
48、 Thinking 6)Theoretically,one can distinguish a demand-pull inflation from a cost-push inflation by comparing A)how fast prices rise relative to wages.B)the unemployment rate with its natural rate level.C)when prices rise relative to wages.D)government debt to real GDP.Answer:B AACSB:Reflective Thin
49、king 7)Demand-pull inflation can result when A)policymakers set an unemployment target that is too high.B)a persistent budget deficit is financed by selling bonds to the public.C)a persistent budget deficit is financed by selling bonds to the central bank.D)workers get numerous wage increases.Answer
50、:C AACSB:Reflective Thinking 8)Which of the following is least likely to lead to inflationary monetary policy?A)rising unemployment B)expanding federal budget deficits C)declining oil prices D)conflict in the Middle East Answer:C AACSB:Analytical Thinking 9)Which of the following is most likely to l