EXAM I – 1.3 – Flashcards

Money is defined as A) bills of exchange. B) anything that is generally accepted in payment for goods and services or in the repayment of debt. C) a risk-free repository of spending power. D) the unrecognized liability of governments.

The upward and downward movement of aggregate output produced in the economy is referred to as the A) roller coaster B) see saw C) business cycle D) shock wave

Sustained downward movements in the business cycle are referred to as A) inflation. B) recessions. C) economic recoveries. D) expansions.

During a recession, output declines resulting in A) lower unemployment in the economy. B) higher unemployment in the economy. C) no impact on the unemployment in the economy. D) higher wages for the workers.

Prior to all recessions since 1900 there has been a drop in A) inflation. B) the money stock. C) the growth rate of the money stock. D) interest rates.

Evidence from business cycle fluctuations in the United States indicates that A) a negative relationship between money growth and general economic activity exists. B) recessions have been preceded by declines in share prices on the stock exchange. C) recessions have been preceded by dollar depreciation. D) recessions have been preceded by a decline in the growth rate of money.

______ theory relates changes in the quantity of money to changes in aggregate economic activity and the price level. A) Monetary B) Fiscal C) Financial D) Systemic

A sharp increase in the growth of the money supply is likely followed by A) a recession. B) a depression. C) an increase in the inflation rate. D) no change in the economy

It is true that inflation is a A) continuous increase in the money supply. B) continuous fall in prices. C) decline in interest rates. D) continually rising price level.

Which of the following is a true statement A) Money or the money supply is defined as Federal Reserve notes. B) The average price of goods and services in an economy is called the aggregate price level. C) The inflation rate is measured as the rate of change in the federal government budget deficit. D) The aggregate price level is measured as the rate of change in the inflation rate.

If ten years ago the prices of the items bought last month by the average consumer would have been much higher, then one can likely conclude that A) the aggregate price level has declined during this ten-year period. B) the average inflation rate for this ten -year period has been positive. C) the average rate of money growth for this ten-year period has been positive. D) the aggregate price level has risen during this ten- year period.

From 1950-2008 the price level in the US increased more than A) twofold B) threefold C) sixfold D) ninefold

Complete Milton Friedman's famous statement, "Inflation is always and everywhere a _______ phenomenon A) recessionary B) discretionary C) repressionary D) monetary

There is a ______ association between inflation and the growth rate of money A) positive; demand B) positive; supply C) negative; demand D) negative; supply

Evidence from the US and other foreign countries indicates that A) there is a strong positive association between inflation and growth rate of money over long periods of time. B) there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon." C) countries with low monetary growth rates tend to experience higher rates of inflation, all else being constant. D) money growth is clearly unrelated to inflation.

Countries that experience very high rates of inflation may also have A) balanced budgets. B) rapidly growing money supplies. C) falling money supplies. D) constant money supplies.

Between 1950 and 1980 in the US interest rates trended upward. During this same time period, A) the rate of money growth declined. B) the rate of money growth increased. C) the government budget deficit (expressed as a percentage of GNP) trended downward. D) the aggregate price level declined quite dramatically.

The management of money and interest rates is called ______ policy and is conducted by a nation's _____ bank A) monetary; superior B) fiscal; superior C) fiscal; central D) monetary; central

The organization responsible for the conduct of monetary policy in the US is the A) Comptroller of the Currency. B) U.S. Treasury. C) Federal Reserve System. D) Bureau of Monetary Affairs.

______ policy involves decisions about government spending and taxation A) Monetary B) Fiscal C) Financial D) Systemic

When tax revenues are greater than government expenditures, the government has a budget ________. A) crisis B) deficit C) surplus D) revision

A budget _______ occurs when government expenditures exceed tax revenues for a particular time period. A) deficit B) surplus C) surge D) surfeit

Budgets deficits can be a concern because they might A) ultimately lead to higher inflation. B) lead to lower interest rates. C) lead to a slower rate of money growth. D) lead to higher bond prices.

Budget deficits are important because deficits A) cause bank failures. B) always cause interest rates to fall. C) can result in higher rates of monetary growth. D) always cause prices to fall

What happens to economic growth and unemployment during a business cycle recession? What is the relationship between the money growth rate and a business cycle recession?