Which of the following statements would Milton Friedman agree with concerning the conduct of monetary policy?
A) Information lags are short, enabling the central bank to respond quickly to changes in the economy.
B) There is little uncertainty over the effect of a change in the money supply on the economy.
C) There are long and variable lags between monetary policy actions and their economic results.
D) Wage and price adjustments are relatively slow, so changing the money supply will have a minimal impact on the real economy.
C
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An economy produces only two goods: paper and scissors. Dyes from paper production pollute a nearby river. Use a production possibilities curve (PPC) to illustrate your explanation of how the unfettered market would fail to provide the efficient mix of paper and scissors.
What will be an ideal response?
A PPF bows outward because
A) not all resources are equally productive in all activities. B) consumers prefer about equal amounts of the different goods. C) entrepreneurial talent is more abundant than human capital. D) resources are used inefficiently.
The present value of an asset and the rate of interest
a. are not related b. are related inversely c. cannot change in opposite directions d. are equivalent e. are directly related
Based on the information in the table, what quantity of reserves would the Federal Reserve have had to inject into the economy in 1932 to prevent the money supply from falling, given that the public increased the amount of currency it held and that banks increased the reserve-deposit ratio? Currency held by public(in billions)Reserve-deposit ratioBank reserves (in billions)Money supply (in billions)December 1931$4.590.095$3.11$37.3December 1932$4.820.109$3.18$34.0
A. $0.30 billion B. $0.66 billion C. $3.54 billion D. $0.89 billion