Monetarist Economics
29 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is crucial for stability in the economy according to monetarists?

  • Rule for the growth rate in nominal income
  • Stability in the growth of the money stock (correct)
  • Fiscal policy
  • Discretion of policymakers

    • What is the main characteristic of a constant growth rate rule as proposed by M Friedman?

  • It is a flexible rule
  • It is based on fiscal policy
  • It is a fixed rate of growth (correct)
  • It is based on discretion of policymakers

    • What is the effect of fiscal policy on real or nominal income according to monetarists?

  • It is unpredictable
  • It has no effect
  • It has a significant effect
  • It has a little systematic effect (correct)

    • What is the Cambridge equation of exchange in the Monetarist Model?

    <p>Md = kPY</p> Signup and view all the answers

    What is the assumption about the proportion of nominal income held as cash in the Cambridge equation?

    <p>It is constant</p> Signup and view all the answers

    What is the alternative form of the Cambridge equation in terms of nominal income?

    <p>MV = PY</p> Signup and view all the answers

    What is the primary factor that determines how much is held as cash and how much as bonds according to Keynes?

    <p>The interest rate</p> Signup and view all the answers

    What happens to the speculative demand for money when the interest rate rises?

    <p>It decreases</p> Signup and view all the answers

    What is the main criticism of the Monetarists about Keynes' theory?

    <p>Keynes' assumption about the homogenous category of bonds</p> Signup and view all the answers

    What is the rate of return on equities or company shares known as?

    <p>Dividends plus capital gains</p> Signup and view all the answers

    What happens to the demand for money when any one of the three types of r increases according to the Monetarists?

    <p>It decreases</p> Signup and view all the answers

    What is the effect of an increase in any one of the three types of r on k according to the Monetarists?

    <p>It keeps k stable</p> Signup and view all the answers

    What is the primary factor that determines nominal income according to the Cambridge equation?

    <p>The money supply</p> Signup and view all the answers

    What is assumed to have little effect on the demand for money according to the Monetarist view?

    <p>The factors rB, rE, and rD</p> Signup and view all the answers

    What is the shape of the LM curve in the Monetarist model?

    <p>Very inelastic</p> Signup and view all the answers

    What is the shape of the IS curve in the Monetarist model?

    <p>Gentle slope</p> Signup and view all the answers

    What is the difference between the Monetarist model and the Keynesian model?

    <p>The Monetarist model assumes a more inelastic LM curve</p> Signup and view all the answers

    What is assumed to be constant in the Cambridge equation?

    <p>The parameter k</p> Signup and view all the answers

    What is the primary purpose of the Taylor rule in monetary policy?

    <p>To respond to deviations in output and inflation from their targets</p> Signup and view all the answers

    What is the target rate of inflation implied in the Taylor rule?

    <p>2%</p> Signup and view all the answers

    What is the variable 'y' representing in the Taylor rule?

    <p>The percentage deviation of output from full-employment output</p> Signup and view all the answers

    What is the real Fed fund rate, according to the Taylor rule?

    <p>i - ∏</p> Signup and view all the answers

    What is the author of the Taylor rule, which is a monetary policy rule that takes into account economic conditions?

    <p>John Taylor</p> Signup and view all the answers

    What happens to the price of bonds when the price of stock equity goes up?

    <p>The price of bonds tends to go down</p> Signup and view all the answers

    What is the main difference between Keynes' and Monetarists' view on demand for money?

    <p>Keynes believes demand for money is unstable, while Monetarists believe it is stable</p> Signup and view all the answers

    What is the formula for the Monetarist theory of money demand?

    <p>Md = k (rB, rE, rD)PY</p> Signup and view all the answers

    What happens to k when there is an increase in any of the rates of return (rB, rE, rD)?

    <p>k decreases</p> Signup and view all the answers

    What is the condition for equilibrium in the money market according to the Monetarists?

    <p>Ms = Md = k (rB, rE, rD)PY</p> Signup and view all the answers

    What would happen to k if there is an increase in the money supply, according to the Monetarists?

    <p>k would increase</p> Signup and view all the answers

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser