M1 is:
A. less useful than M2 for understanding inflation.
B. the money supply the Federal Reserve pays the most attention to in conducting monetary policy.
C. the fastest growing of all of the money aggregates.
D. a more useful measure of the relationship between the money supply and inflation because it includes the most liquid assets.
Answer: A
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Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy. These lessons include the following
A) Rising interest rates indicate a tightening of monetary policy, whereas falling interest rates indicate an easing of monetary policy. B) Monetary policy can be highly effective in reviving a weak economy even if short-term interest rates are already near zero. C) Avoiding fluctuations in the level of unemployment is an important objective of monetary policy, thus providing a rationale for interest-rate stability as the primary long-run goal for monetary policy. D) Other asset prices beside those on short-term debt instruments do not contain important information about the stance of monetary policy because they are not important elements in various monetary policy transmission mechanisms.
According to New Keynesian theory, fluctuations in the target interest rate are not a good explanation of the business cycle because the model predicts that
A) consumption is constant. B) labor is countercyclical. C) average labor productivity is countercyclical. D) output is countercyclical.
A cereal producer finds that when Steve McNair, the quarterback for the Tennessee Titans, endorses its product, its annual income increases from $1 million to $3 million. If the interest rate is 10 percent, the present value of Steve's name is
a. $.2 million b. $3 million c. $10 million d. $20 million e. infinite
If consumer tastes are changing more in favor of the consumption of a particular good the
a. market demand curve will shift to the left. b. consumer will move up a given demand curve, decreasing the quantity demanded. c. consumer would move down a given demand curve, decreasing the quantity demanded. d. consumer would move down a given demand curve, increasing the quantity demanded. e. market demand curve would shift to the right.