The monetarists believe that an increase in the money supply of about 4% per year, regardless of economic conditions, is a good monetary policy. Why was 4% chosen?
A. It reflects the fact that the output of the economy has been growing at about 3 to 4% per year, and a 4% increase in the money supply would tend to stabilize the price level.
B. By equating the money supply growth rate and the unemployment rate, the monetarists believe that the output of the economy will increase.
C. By restricting the increase in money supply to 4%, the monetarists hope to limit fluctuations in the price trend to 4% and stabilize velocity.
D. Price fluctuations have been shown to be historically more than 4%. By a steady 4% increase in the money supply, the monetarists hope to drive prices down.
A. It reflects the fact that the output of the economy has been growing at about 3 to 4% per year, and a 4% increase in the money supply would tend to stabilize the price level.
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The life-cycle theory of consumption predicts that when a person anticipates a higher income in the future, then that person will
A) consume more and save less in the current period. B) consume less and save more in the current period. C) consume less and save less in the current period. D) not change the amount of consumption or saving in the current period.
Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information
a. True b. False
A duopoly is
a. a cartel in which all members try to cheat on the cartel. b. an industry with only two sellers. c. an industry with only two buyers. d. a cartel with only two members.
According to the Keynesian view, capitalism
a. is a highly productive form of economic organization that works best when government intervention is least. b. experiences booms and busts because of the instability of private investment that is driven by fickle changes in business optimism. c. experiences booms and busts that are primarily the result of inappropriate monetary policy. d. experiences fluctuations in aggregate demand that cannot be controlled with fiscal policy.