Monetary Theory
6B: Classical and Neoclassical Theories of Money
Business cycles tend to be relatively minor and are quickly and automatically cured so that the economy will return to its original full employment equilibrium according to: (a) the population dynamics theory. (b) psychological theories of the business cycle. (c) Joseph Schumpeter’s theory of creative destruction. (d) classical macroeconomic theory. (e) external shock theory.
A graph showing a positive relationship between the interest rate and the expected inflation rate would illustrate the: (a) Cambridge equation. (b) Friedman’s liquidity effect. (c) Fisher effect. (d) Laffer curve. (e) quantity theory of money.
Interest rates on given financial instruments tend to be higher the: (a) shorter the period to maturity. (b) lower the risk of default. (c) more liquid the asset is. (d) greater is the level of uncertainty about the real rate of interest that will be received. (e) lower is the face value at maturity relative to the current market price.
The effect on nominal interest rates of an increase in the rate of monetary growth that is least consistent with the other effects is the: (a) expected inflation [Fisher] effect. (b) nominal income effect. (c) liquidity [Keynes] effect. (d) price level effect.
1. The idea that growth of the money supply at a low fixed percentage rate annually is likely to yield greater macroeconomic stability than when monetary policy is at the discretion of government officials is the foundation for: (a) neoclassical macroeconomic theory. (b) John Maynard Keynes’s liquidity preference theory. (c) Irving Fisher’s natural rate of interest. (d) Abba Lerner’s wage-price reaction functions. (e) Milton Friedman’s monetary growth rule.
2. According to classical economists, Aggregate Demand primarily determines: (a) levels of national output and income. (b) total production in the economy. (c) Aggregate Supply at full employment. (d) the price level.
3. The income
Business cycles tend to be relatively minor and are quickly and automatically cured so that the economy will return to its original full employment equilibrium according to: (a) the population dynamics theory. (b) psychological theories of the business cycle. (c) Joseph Schumpeter’s theory of creative destruction. (d) classical macroeconomic theory. (e) external shock theory.
A graph showing a positive relationship between the interest rate and the expected inflation rate would illustrate the: (a) Cambridge equation. (b) Friedman’s liquidity effect. (c) Fisher effect. (d) Laffer curve. (e) quantity theory of money.
Interest rates on given financial instruments tend to be higher the: (a) shorter the period to maturity. (b) lower the risk of default. (c) more liquid the asset is. (d) greater is the level of uncertainty about the real rate of interest that will be received. (e) lower is the face value at maturity relative to the current market price.
The effect on nominal interest rates of an increase in the rate of monetary growth that is least consistent with the other effects is the: (a) expected inflation [Fisher] effect. (b) nominal income effect. (c) liquidity [Keynes] effect. (d) price level effect.
1. The idea that growth of the money supply at a low fixed percentage rate annually is likely to yield greater macroeconomic stability than when monetary policy is at the discretion of government officials is the foundation for: (a) neoclassical macroeconomic theory. (b) John Maynard Keynes’s liquidity preference theory. (c) Irving Fisher’s natural rate of interest. (d) Abba Lerner’s wage-price reaction functions. (e) Milton Friedman’s monetary growth rule.
2. According to classical economists, Aggregate Demand primarily determines: (a) levels of national output and income. (b) total production in the economy. (c) Aggregate Supply at full employment. (d) the price level.
3. The income