the economics of money, banking, and financial markets

(Sean Pound) #1
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  1. Financing a debt through the direct-issue of currency is called ____.
    A) printing money
    B) monetizing the debt
    C) open market purchases
    D) open market sales
    Answer: A
    Diff: 1 Type: MC Page Ref: 532
    Skill: Recall
    Objective List: 21.1 Describe how the demand for money is determined




  2. In March 2007, the inflation rate in Zimbabwe reached ____.
    A) over 1500 percent
    B) over 150 percent
    C) over 15 percent
    D) over 15000 percent
    Answer: A
    Diff: 1 Type: MC Page Ref: 532
    Skill: Recall
    Objective List: 21.1 Describe how the demand for money is determined




  3. The Zimbabwean hyperinflation was caused by ____.
    A) the government printing currency
    B) wars between rebel factions
    C) budget surplus
    D) the agricultural sector
    Answer: A
    Diff: 1 Type: MC Page Ref: 532
    Skill: Recall
    Objective List: 21.2 Define the theories of the demand for money




  4. Explain how financing a persistent deficit by money creation will lead to a sustained inflation.
    Answer: A budget deficient can lead to an increase in the money supply if it is financed by the
    creation of high-powered money. Because the quantity theory of money explains inflation only
    in the long run, to produce inflation, the budget deficit must be persistent.
    Diff: 1 Type: SA Page Ref: 532
    Skill: Recall
    Objective List: 21.1 Describe how the demand for money is determined



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