To use money growth as a short-term monetary policy instrument, a central bank must:
A. believe the deposit expansion multiplier is volatile and unpredictable.
B. believe there is a stable link between the monetary base and the rate of inflation.
C. believe that only money matters.
D. believe that there is an unpredictable relationship between money aggregates and inflation.
Answer: B
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A country's capital stock decreased after a war while its labor supply remained constant. Which of the following will happen in this case if output is a function of capital and efficiency units of labor?
A) Its total output will remain constant. B) Its total output will decrease. C) Its per capita output will remain constant. D) Its per capita output will increase.
What is one potential problem with nationalized health care?
A) It might not reduce moral hazard. B) It is guaranteed to solve the principal-agent problem. C) It would be efficient in risk bearing. D) It might cost too much.
Cartels are likely to be better able to prevent their members from cheating on an agreement: the greater the number of members in the cartel.
a. the fewer the number of members in the cartel b. the greater the number of members in the cartel. c. the greater are the differences in production costs across member firms. d. the greater are the differences in demand projections across member firms.
When an economy is experiencing a negative output gap, there is:
A. inflationary pressure due to low demand. B. inflationary pressure due to high demand. C. significant inflationary pressure due to low demand. D. significant inflationary pressure due to high demand.