796 "
© 2014 Pearson Canada Inc."25.4 Causes of Inflationary Monetary Policy
To say that inflation is a monetary phenomenon seems to beg the question: ____.
A) Why does inflationary monetary policy occur?
B) Why do politicians seek reelection?
C) Why is the Fed independent?
D) Why does the US Treasury print so much money?
Answer: A
Diff: 2 Type: MC Page Ref: 613
Skill: Recall
Objective List: 25.3 Describe whether monetary policy should be activist or passive
The combination of a successful wage push by workers and the government's commitment to
high employment leads to ____.
A) demand-pull inflation
B) supply-side inflation
C) supply-shock inflation
D) cost-push inflation
Answer: D
Diff: 2 Type: MC Page Ref: 613
Skill: Recall
Objective List: 25.3 Describe whether monetary policy should be activist or passive
If workers do not believe that policymakers are serious about fighting inflation, they are most
likely to push for higher wages, which will ____ aggregate ____ and lead to
unemployment or inflation or both, everything else held constant.
A) decrease; demand
B) increase; demand
C) decrease; supply
D) increase; supply
Answer: C
Diff: 2 Type: MC Page Ref: 613
Skill: Recall
Objective List: 25.3 Describe whether monetary policy should be activist or passive
If workers believe that government policymakers will increase aggregate demand to avoid a
politically unpopular increase in unemployment when workers demand higher wages, then
workers will not fear higher unemployment and their wage demands will result in ____.
A) demand-pull inflation
B) hyperinflation
C) deflation
D) cost-push inflation
Answer: D
Diff: 2 Type: MC Page Ref: 613
Skill: Recall
Objective List: 25.3 Describe whether monetary policy should be activist or passive