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© 2014 Pearson Canada Inc."
"How do we prevent the inflationary fire from igniting again and stop the roller coaster ride in
the inflation rate of the last 40 years?" Milton Friedman's famous proposition suggests the simple
solution: ____.
A) reduce the number of terms that politicians are allowed to serve
B) reduce the growth rate of the money supply
C) reduce the marginal tax rate on low-income wage earners
D) increase the marginal tax rates on businesses that hike prices in excess of 5 percent per year
Answer: B
Diff: 2 Type: MC Page Ref: 612
Skill: Applied
Objective List: 26.3 Explain Milton Friedman's famous proposition that "inflation is always and
everywhere a monetary phenomenon"
Milton Friedman's proposition concerning the cause of inflation implies a simple solution to
the inflation problem: ____.
A) reduce government budget deficits
B) limit the ability of fiscal policymakers to bring pressure to bear on the monetary authority
C) limit the number of terms that politicians are allowed to serve
D) reduce the growth rate of the money supply
Answer: D
Diff: 2 Type: MC Page Ref: 612
Skill: Applied
Objective List: 26.3 Explain Milton Friedman's famous proposition that "inflation is always and
everywhere a monetary phenomenon"
Milton Friedman's proposition that inflation is always and everywhere a monetary
phenomenon holds only if ____.
A) government budget deficits do not rise continually
B) the unemployment rate does not rise continually
C) the inflation rate rises continually
D) Canada does not experience more than one negative supply shock per decade
Answer: C
Diff: 2 Type: MC Page Ref: 612
Skill: Recall
Objective List: 26.3 Explain Milton Friedman's famous proposition that "inflation is always and
everywhere a monetary phenomenon"